According to the St. Louis Federal Reserve, the real median household income in America is roughly $61,372 at the end of 2018. In other words, real median household income hasn't gone anywhere in roughly 20 years. The data is not out yet for 2020, but you can bet after tens of millions have lost their jobs due to the coronavirus pandemic, the median household income is likely going down.
Is there any wonder why American retirement savings have remained dismal? Combine poor spending and savings habits along with rising costs in healthcare, housing, and tuition, retiring early or even comfortably at a conventional age is all but a pipe dream.
Median American Income By Age and Sex
Let's now look at the median American salary by age and sex as compiled by the US Census Bureau.
It's good to see that both women and men make more the older they get. It's also interesting to see how the wage gap widens starting in the 35-44 range as mostly women drop out of the work force to raise children.
Both my wife and I are stay at home parents to a lovely boy. We able to survive in expensive San Francisco without jobs because we spent almost 20 years building passive income that is now over $200,000 a year. After selling our SF rental house in 2017 to simplify life, we reinvested $550,000 of the proceeds in real estate crowdfunding in the heartland of America where growth is stronger and net rental yields are 3X – 5X higher.
Without diligently saving and investing all these years, either one or both of us would have had to go back to work within 3-6 months after our son was born.
Although saving aggressively is a fundamental part of wealth creation, you can save aggressively if you don't have a high enough income. I started off at only $40,000 while living in Manhattan in 1999. But that income grew to multiple six figures in a 13 year career due to one key job hop, multiple promotions, high performance, and consistently asking for what I deserve.
My wife did the same, although her income trajectory was less steep because she wasn't as aggressive in asking for raises and promotions. Below are some alternative suggestions for boosting your income, and ultimately your net worth for financial freedom.
Strategies For Increasing Income And Net Worth
1) Geoarbitrage to a cheaper location. First find a cheaper place to live in your city. With the popularity of Uber and Lyft, private transportation cost has come down by ~80%. If you can save significantly on housing cost, you will have a much better ability to grow your savings gap. If you want to take things a step further, you can relocate to a different part of the country or the world.
In fact, it is largely due to geoarbitrage within the United States that I'm bullish on the Heartland of America. I'm taking advantage of this logical migration shift away from expensive coastal cities by aggressively buying midwest and southern real estate through real estate crowdfunding.
2) Work more. A 40 hour workweek is arbitrary given there are 168 hours in a week. If you want to make more money, the easiest thing you can do is work more hours. Hard work requires no skill. Work 50 hours, and watch your income grow by 25% more than the 40 hour worker.
Work 60 hours a week and watch your income grow by 50% or more due to over time. The more you work, the more you will get paid and recognized by your peers. Work hard when you are young, because your energy will eventually fade. As Elon Musk said, “nobody has changed the world working only 40 hours.”
3) Build multiple income streams. Instead of relying on just one income source, as most Americans do, it's important to build as many side engines of income as possible. If one engine goes down, another engine keeps your ship afloat. Goodness forbid you lose your job. The wealthiest people in this country have at least five different passive income sources. Here are the best passive income investments to consider by rank.
4) Continuously ask for more. If you hit the open market, you will likely get at least a 25% raise. Too many people get comfortable at a job and never ask for a raise and a promotion as aggressively as they should. Too many people just stay in one place for way too long, like I did with 11 years at my previous employer.
Don't be afraid to ask for what you are worth and jump ship. You won't regret it when you look back upon your career. Here's a great story about how my wife successfully asked for a promotion and got a huge raise while also eventually negotiating a great severance for herself.
5) Brand yourself online. Everybody needs to have their own website online for branding and lead generation purposes. Don't let Facebook, LinkedIn, and Twitter get rich off your identity. Get rich off yourself! Once you establish your own website, opportunities begin coming your way. People will want to lure you away from full-time work or hire you for freelance consulting opportunities. You might even develop a large enough site that generates advertising revenue.
I never would have imagined Financial Samurai growing to what it is today after launching in 2009. But I'm thankful for the significant revenue it generates to allow both my wife and I to be stay at home parents. Learn how to start your own website today with my step-by-step guide.
Save As Much Money As Possible
There is no rewind button in life. You must save aggressively and invest wisely. Don't expect anybody to save you. You must save yourself. Not a day goes by where I'm not ecstatic that I lived in a studio with a friend to save money in my 20s, or start my side hustles in my 30s.
Having financial freedom is priceless. You should also be all over your finances and no where all your money is going. To do so, sign up with Personal Capital, the best free financial tool online today. The tool will help you organize your finances, track your net worth, assess your investment portfolios for excessive fees, and help you plan for your retirement.
