Latest news with #middleclass
Yahoo
2 hours ago
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6 Investing Moves That Benefit Millionaires, but Can Hurt the Middle Class
For members of the middle class, who only have a moderate amount of money to invest, every move you make counts and can have a big impact on your net worth. Millionaires, on the other hand, often have more room to play with a wider margin of error. Learn More: Read Next: Here, William 'Bill' London, a finance expert and partner at Kimura London & White LLP, explained what kind of moves millionaires can make that the middle class just can't, and how to think of investing. High Capital Investments When millionaires play with money, their investments often have qualities that middle class can't achieve, London said, including 'high capital, long horizons and privileged access to markets.' Millionaires are investing in hedge funds, venture capital or high property syndications that 'are frequently typified by limited accessibility, low liquidity and high levels of risk,' he said. The average middle-class person is lucky to have retirement accounts and maybe a high-yield savings account or money market account. Millionaires can invest big money because they have the financial buffer to incur 'little more than slight hardships instead of severe life-transforming effects, a situation that normally applies to most families holding middle incomes,' London explained. Find Out: Tax-Loss Harvesting Practice in Private Equity Tax-loss harvesting — essentially where investors reduce their taxable income by selling investments that have lost value — is another strategy millionaires use because they have 'substantial taxable investment portfolios and sophisticated tax planning,' London said. For the average person with a 401(k) and limited brokerage activity, the benefits are small and often not worth the complexity. Private equity, in general, is typically reserved for high-income earners because you have to commit large amounts of capital over longer durations, London explained. Millionaires have the kind of liquidity that allows for them to extract big sums of money without suffering to pay for their basic expenses. To a middle-class earner, liquidity might just mean a slim buffer 'to take care of unexpected situations, educational expenses or retirement goals which makes this investment strategy risky and often undesirable,' London said. Financing Through Debt Not only do millionaires have the ability to borrow against investment portfolios or real estate at low interest rates to reinvest or defer taxes, 'They have the liquidity and safety nets to handle downturns,' London said. A middle-class investor just isn't likely to have the financial buffer or willing to take a risk refinancing a home to invest. 'If the market moves in the wrong direction, they may not have the flexibility to recover.' Higher Risk Tolerance In a nutshell, millionaires can absorb losses without major lifestyle changes. 'They are able to take on high-risk, high-reward opportunities with patience and backup plans,' London pointed out. Middle-class investors usually cannot afford that luxury; a major loss could delay retirement or put essential life goals at risk. Using Tax-Friendly Instruments While almost anyone can get some kind of tax benefit for making a charitable contribution, where the benefits really kick in is at a level of money the middle class is unlikely to have. 'The tax benefits that are available for donor-advised funds and other sophisticated trusts are relevant more frequently in situations that involve large charitable gifts or intergenerational transfers of wealth,' London said. For most families, the administration and maintenance costs of setting up such funds and trusts alone would be worth more than their potential savings. Postponing Revenues and Lowering Current Period Profits Most middle-class people live, if not quite paycheck to paycheck, not far ahead of that, with a small emergency fund or buffer, and with every dollar of income counting. Millionaires, on the other hand, can actually delay income to affect their taxes. 'They may delay bonuses, use stock options, or receive investment returns structured to maximize long-term capital gains rates,' London explained. That's a flexibility the average person earning a fixed paycheck simply does not have. Suggestions for the Middle Class So maybe you're not a millionaire — yet. You still can and should continue to invest. London suggested that the best strategy for long-term investment success for middle-income investors is as follows: Building a diversified investment portfolio Participating in frequent contributions Reducing fees Avoiding emotion-driven decisions As compelling as these millionaires' big moves may look at a distance, London warned that it's 'often counterproductive' for the middle class to try to replicate them. 'Time-tested and simple investment methods often provide the most predictable results.' More From GOBankingRates How Much Money Is Needed To Be Considered Middle Class in Your State? This article originally appeared on 6 Investing Moves That Benefit Millionaires, but Can Hurt the Middle Class Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15 hours ago
- Business
- Yahoo
How Much Will 4 Years of Tariffs Cost the Middle Class?
For middle-class families, the impact of President Donald Trump's tariffs is more than a policy debate. Read Next: Discover More: According to researchers at the University of Pennsylvania's Wharton School of Business, middle-class households face an average of $22,000 in lifetime losses due to tariffs. That's a significant blow to households already struggling with rising costs for food, housing, and essentials. In addition, experts also say that the real impact could affect everyday expenses, often in ways families don't immediately see. So, how much will four years of tariffs really cost the middle class? What Four Years of Tariffs Could Cost You The middle-class price tag for tariffs ranges from $3,800 to nearly $5,000 per household per year. Over four years, that could mean up to $20,000 in lost purchasing power, a steep cost for families already squeezed by inflation. Here are the receipts: A Yale Budget Lab model found that tariffs could bump grocery bills by up to $4,900 annually. That same model estimates a broader $3,800 annual loss per household from consumer price increases tied to all 2025 tariffs. A separate study from the Becker Friedman Institute at the University of Chicago found that tariffs imposed in 2018 resulted in a 12% price increase for washers and dryers, with ripple effects extending to other major appliances. 'I've seen grocery bills for clients increase by 10% due to tariffs on imported food,' said Seann Malloy, founder and managing partner at Malloy Law Offices, LLC. Where Price Increases Add Up Fast Tariffs don't just touch one product or category. They compound across the things families rely on most. The steepest price hikes are being seen in cars, clothes, electronics and even shipping, as import costs are quietly passed on to consumers. Malloy said items like clothes, cars and electronics tend to see the steepest price hikes since 80-95% of tariff costs are typically passed on to consumers. Based on his estimates, clothing prices have risen by 17%, cars by 8.4%, and electronics by 10-5%. 'For example, a $30,000 car could become $2,520 more expensive, and a $500 smartphone could gain $75,' Malloy said. 'Services like shipping, which is linked to imported fuel, would also rise by 5-7%.' How to Cushion the Financial Blow If tariffs persist at 2025 levels, the Yale Budget Lab estimates the average household will lose about $3,800 per year in purchasing power due to higher prices. Over four years that adds up to more than $15,000 in additional costs. 'That could require families to tap savings or take on debt, especially for those on fixed incomes,' Malloy said. 'Clients of mine have sliced out $2,000 a year of retirement contributions to pay for them. My suggestion for the average household is to build a $5,000 emergency fund now to buffer long-term tariff impacts and avoid high-interest credit card debt.' How to Defend Your Budget Against Tariffs While individuals can't control trade policy, they can take steps to minimize the impact of prolonged price increases. Financial experts said smart shopping, strategic borrowing and prioritizing savings over extras could help households stay afloat if tariffs remain in place. 'To preserve funds, buy groceries and electronics at discount warehouses such as Costco, where a $200 annual membership yields $1,000 savings annually,' Malloy said. 'Purchase produce at farmers' markets, if you can, though prices might go up with demand.' He added, 'My suggestion is to explore credit unions for low-interest loans to cover unexpected costs and consult a financial advisor to prioritize savings over discretionary spending.' More From GOBankingRates Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on How Much Will 4 Years of Tariffs Cost the Middle Class? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
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3 Money Moves the Middle Class Should Make After the Passing of Trump's ‘Big Beautiful Bill'
President Donald Trump's 'Big Beautiful Bill' finally cleared the House and the Senate and was signed by the president on July 4. The bill has several policies that could impact the middle class. Making some money moves and preparing for the new changes can help you save money and grow your portfolio. Read Next: Check Out: Here are some of the top money moves the middle class should make. Also see how much the definition of middle class has changed in every state. Capitalize on Clean Energy Credits Now The bill is cycling out of energy credits, which affect electric vehicles, solar panels and other clean energy sources. Chad Gammon, CFP, owner of Custom Fit Financial, suggested making clean energy purchases before the deadline if you've been holding out. 'If you are considering any upgrades, now would be the time to do it. Some credits, such as electric vehicles, are available until September 30, 2025. Other credits, like the residential clean energy credit, will end on December 31, 2025. This can help if you anticipate higher energy bills in the years to come, and reputable installers can assist with an estimated payback period,' he said. Be Aware: Open a 'Trump Account' A 'Trump account' can give your child a head start with investing money and accumulating wealth. Gammon highlighted the promising opportunity while encouraging people to monitor how it will work before investing additional money. 'If you have a child in 2025, I'd look into opening a 'Trump account.' The federal government will give $1,000 as a starter contribution. There are options to contribute further. I'd wait for more details on that, but would set it up for the initial $1,000,' he said. Children who are born between 2025 and 2028 are eligible for a $1,000 deposit, per CNBC. The money in the account will be invested in a fund that tracks the U.S. stock market, the outlet reported. Plan Your Taxes The bill can reduce your tax burden, especially if you use the standard deduction. Gammon explained how the new bill can add more money to your wallet. 'I would also look at your estimated 2025 taxes and adjust withholdings, if needed. The standard deductions moved for [couples who are married and filing jointly] from $30,000 to $31,500, or if you are single, it went from $15,000 to $15,750. This could lower your tax liability, where you can adjust your withholdings on your W-4 and free up extra monthly cash,' he said. Seniors can also get a boosted tax deduction thanks to the bill. Seniors who are 65 or older can get an additional $6,000 tax deduction if their modified adjusted gross income is below $75,000. Married couples filing jointly can capitalize on the additional tax deduction if their combined modified adjusted gross income is below $150,000. This additional tax deduction for seniors currently applies for the tax years 2025 to 2028. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 These Cars May Seem Expensive, but They Rarely Need Repairs 7 Things You'll Be Happy You Downsized in Retirement This article originally appeared on 3 Money Moves the Middle Class Should Make After the Passing of Trump's 'Big Beautiful Bill' Sign in to access your portfolio
Yahoo
a day ago
- Business
- Yahoo
3 Money Moves the Middle Class Should Make After the Passing of Trump's ‘Big Beautiful Bill'
President Donald Trump's 'Big Beautiful Bill' finally cleared the House and the Senate and was signed by the president on July 4. The bill has several policies that could impact the middle class. Making some money moves and preparing for the new changes can help you save money and grow your portfolio. Read Next: Check Out: Here are some of the top money moves the middle class should make. Also see how much the definition of middle class has changed in every state. Capitalize on Clean Energy Credits Now The bill is cycling out of energy credits, which affect electric vehicles, solar panels and other clean energy sources. Chad Gammon, CFP, owner of Custom Fit Financial, suggested making clean energy purchases before the deadline if you've been holding out. 'If you are considering any upgrades, now would be the time to do it. Some credits, such as electric vehicles, are available until September 30, 2025. Other credits, like the residential clean energy credit, will end on December 31, 2025. This can help if you anticipate higher energy bills in the years to come, and reputable installers can assist with an estimated payback period,' he said. Be Aware: Open a 'Trump Account' A 'Trump account' can give your child a head start with investing money and accumulating wealth. Gammon highlighted the promising opportunity while encouraging people to monitor how it will work before investing additional money. 'If you have a child in 2025, I'd look into opening a 'Trump account.' The federal government will give $1,000 as a starter contribution. There are options to contribute further. I'd wait for more details on that, but would set it up for the initial $1,000,' he said. Children who are born between 2025 and 2028 are eligible for a $1,000 deposit, per CNBC. The money in the account will be invested in a fund that tracks the U.S. stock market, the outlet reported. Plan Your Taxes The bill can reduce your tax burden, especially if you use the standard deduction. Gammon explained how the new bill can add more money to your wallet. 'I would also look at your estimated 2025 taxes and adjust withholdings, if needed. The standard deductions moved for [couples who are married and filing jointly] from $30,000 to $31,500, or if you are single, it went from $15,000 to $15,750. This could lower your tax liability, where you can adjust your withholdings on your W-4 and free up extra monthly cash,' he said. Seniors can also get a boosted tax deduction thanks to the bill. Seniors who are 65 or older can get an additional $6,000 tax deduction if their modified adjusted gross income is below $75,000. Married couples filing jointly can capitalize on the additional tax deduction if their combined modified adjusted gross income is below $150,000. This additional tax deduction for seniors currently applies for the tax years 2025 to 2028. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 These Cars May Seem Expensive, but They Rarely Need Repairs 7 Things You'll Be Happy You Downsized in Retirement This article originally appeared on 3 Money Moves the Middle Class Should Make After the Passing of Trump's 'Big Beautiful Bill'
Yahoo
3 days ago
- Business
- Yahoo
4 Common Investing Strategies That Almost Never Work for Middle-Class Beginners
When you're getting started with investing, it's easy to be drawn to strategies that sound smart or seem to build wealth fast. But many popular investing strategies aren't built for long-term success. They're risky, complex or simply not aligned with the financial reality of most middle-class investors. Read Next: Learn More: Here are four common investing strategies that almost never work for middle-class investors just getting started and why you should avoid them. Investing In Individual Stocks Alone Buying stocks of companies you love might seem like a good place to start. But putting all your money in individual stocks or one asset class is risky. Stock prices can swing wildly based on news, earnings reports and industry shifts. Even big companies can suffer major losses in case of a negative sentiment. A better approach is having a diversified portfolio with individual stocks, index funds, exchange-traded funds (ETFs) and even bonds. The goal is not to put all your eggs in one basket. Check Out: Day Trading Day trading — buying and selling stocks and other securities the same day — gets a lot of hype. Many people on social media say it's the fastest way to double your money. But it's also the fastest way to lose your money. In reality, day trading is more of gambling than investing, especially if you don't know what you're doing. It requires years of experience and emotional discipline. Even those who have been in the game for decades are still losing money. If your goal is to build wealth over time, you're better off buying stocks and index funds than day trading. Timing the Market Trying to buy low and sell high sounds like the best investing strategy. However, doing so will cost you more down the road. The idea behind timing the market is to wait until prices drop, then buy. When prices go up, sell and lock in profits. However, no one knows when those drops and spikes will happen. Even hedge fund managers struggle to get it right. According to data from Hartford Funds, 78% of the stock market's best days happen in a bear market or the first two months of a bull market. Additionally, it explained that if an investor had missed out on 10 of the market's best days over 30 years, their returns would've been reduced by half. This is the reason to stay invested during market ups and downs. That's why consistency beats timing the market. A strategy like dollar-cost averaging — where you invest the same amount of money at regular intervals regardless of where the market is going — helps take the guesswork out of the process. Chasing Trends There's always 'the next big thing' in the headlines. Whether it's artificial intelligence (AI), crypto or robotaxis, it's tempting to jump in because of fear of missing out (FOMO). But chasing trends is often a losing strategy because by the time a stock or sector is hot, much of the upside has already been priced in. Buying at the peak could lead to painful losses if those who jumped in early sell. Instead of chasing trends, create an investing plan around your goals and risk tolerance. And remember that trends come and go, but a disciplined strategy is what builds real wealth. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 8 Common Mistakes Retirees Make With Their Social Security Checks 6 Hybrid Vehicles To Stay Away From in Retirement This article originally appeared on 4 Common Investing Strategies That Almost Never Work for Middle-Class Beginners Sign in to access your portfolio
