I have worked with young families just starting for nearly 20 years.  What I have found is that there's a shortage of advice geared towards individuals with average incomes, beyond paying down debt, budgeting, or making more income. (Like no one thought of that!) Every financial plan needs to be unique and hand-crafted to the saver; however, I do have some best practices that you can follow.

Create a Budget

I know everyone says to create a budget, and if you're reading financial blogs, the chances are that you know enough to budget. However, I would be remiss if I didn't mention you couldn't create a plan or improve upon a plan if you do not have a basic budget and list of your expenses.

Tax Planning

Now that you have a basic budget, it's time to create a tax budget.  One of the biggest mistakes families with average incomes make is not creating a tax budget early in the year.  The tax code has several incentives for individuals and families with averages incomes may qualify for such incentives as the Premium Tax Credit, Retirement Savers Credit, and Earned Income Credit. 

The best advice I can give to anyone is to print out the income thresholds for any tax credits or deductions they intend to use during tax time and compare your year to date earnings with the program's income thresholds every month. Should you find that you are in danger of losing the tax incentive, you can adjust your 401k/IRA contributions or engage in other tax planning.

Do not leave tax planning to tax season (mid-January to April 15Th). After December 31, there is very little that can be done to reduce taxable income. Every year during tax season, I meet people who missed out on valuable tax incentives because they were not familiar with the income limits and waited until it was too late to engage in tax planning.

Create a Financial Disaster Preparedness Plan

There are some differences between high-income earners and average income earners. In particular, average income earners have less margin for error.  A 100K medical expense that would bankrupt a family making 50k a year is survivable, although unfortunate, for a family making 200k.

A financial disaster preparedness plan should include:

  • An Emergency Fund, starting with a few months of expenses and try to grow it to a few months of income.
  • Legal Documents, such as estate planning documents, guardianship documents for minor children, powers of attorney, and pre-nuptial/post-nuptial documents.  Hire a competent lawyer: don't trust boilerplate forms downloaded off of the internet.
  • Asset protection, if you have a small business, a side gig, rental properties, act as a freelancer or as an independent contractor, talk to your CPA/lawyer about asset protection.
  • Business credit. If you have a business, develop business credit as quickly as possible to avoid using your personal credit for business purposes. (When a business is new in credit terms, lenders will expect you to guarantee your business' borrowing personally.)

Be Creative

Being successful on modest incomes often means thinking outside of the box. Hopefully, you followed step one. What is your most significant expense after taxes, health care, and insurance? If it is energy and you own your home, consider having a home energy audit done. Putting 10k into additional insulation may not be as sexy as buying an investment, but if it can save you 1,200 dollars a year in oil or propane, the returns might be better. 

Can you install solar, upgrade to a heat pump, or install more energy-efficient central air?

Don't own a home, no problem. Can you barter with your landlord? Maybe they will cut you a break on rent in exchange for doing some property maintenance if you are renting until you have a down payment saved up check onerent.com where you can earn free money towards your home down payment.

The possibilities are endless. Do not limit yourself to just investing in other companies via stocks and mutual funds. Often, the best returns on investments are investing in money-saving improvements—things such as working on your career, starting a side hustle, or launching a small business.

The most important thing for anyone to know starting is that you can live a great life at just about any level of income. Do not judge yourself by other people's standards; find what works for you and your situation. Life is about balance: save some, spend some.