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If you've ever read money advice that didn't seem to apply to your situation, you may have been right.

Guidance that makes sense for a middle-income household might not apply if you're under the poverty line. If your income is on the lower end, you'll have different priorities and concerns than if your W-2 has six figures before the decimal point.

So I've tailored some tips using five income brackets that correspond, roughly, with the five income quintiles defined by the latest Current Population Survey, conducted jointly by the Bureau of Labor Statistics and the Census Bureau. Each bracket represents about 20% of U.S. households. There's plenty of overlap, since tips that apply to one bracket often apply to the ones above it as well. But these bits of advice will give you some idea of what you should focus on now.

Low income: Below $20,000

The official poverty line for a family of four is just under $22,000. Even if you don't consider yourself poor, you don't have a lot of financial wiggle room at the bottom of the income ladder. So here's what's most important:

  • Save $500. Forget, for now, all the advice about saving three to six months' worth of expenses. That's a worthy "someday" goal, but you just need to save a few hundred bucks to start getting ahead. Having $500 set aside can help you cover minor emergencies and avoid payday lenders and bounced-transaction fees. For more, read "Why you need $500 in the bank." (These days, you should also consider a credit union instead of a bank. The fees tend to be lower, which is important when every dollar counts.)
  • Get a break. If you earn income from a job or business, make sure you file a tax return and claim the earned income tax credit. This refundable credit, which is designed to help low- to moderate-income individuals and families, can put hundreds or even thousands of dollars in your pocket. Yet the Internal Revenue Service estimates one-fifth of taxpayers who qualify for this credit don't claim it. Another overlooked credit is the Savers Credit for low- to moderate-income workers. If you can put even a few bucks a year into a retirement account, you can get a tax credit for those contributions on top of being able to deduct them from your taxable income.
  • Avoid businesses that will rip you off. Some types of businesses will charge you outrageous amounts of money because you're poor and may not have access to mainstream credit. These include payday lenders, rent-to-own outfits and buy-here-pay-here car lots. If you want to hang on to the little money you have, you need to steer clear. For more, read "5 businesses that rip off the poor."

Liz Weston

Liz Weston

Lower middle income: $20,000 to $40,000

Review the tips for those earning under $20,000, because they probably apply to you as well. Then consider the following advice to help you get by:

  • Limit your overhead. If you want to have money enough to pay off debt, save for the future and still have a little fun today, it's important to limit your overhead. Keeping your "must-have" expenses -- the costs for shelter, transportation, food, insurance and minimum loan payments -- to 50% of your after-tax income isn't easy, but doing so can ensure you have money left over for other goals. For more details, read "The 50/30/20 budget fix."
  • Save for retirement. Social Security will provide a good-sized chunk of your income in retirement, because the system is set up to replace more of a lower-income worker's earnings than those of a higher-earning worker. (Someone earning $20,000 will get Social Security benefits equal to nearly 70% of his or her working income in Social Security, while someone making $40,000 will get a benefit equal to about half of pre-retirement income.) But you'll still want to put something aside to prevent a big drop in income once you quit work. Take advantage of any available workplace retirement plans. If you don't have a plan at work, open an individual retirement account at a discount brokerage or mutual fund, and set up automatic transfers to fund it.
  • Set up savings buckets. Consider setting up separate savings accounts for irregular and nonmonthly expenses -- car repairs, holidays, vacations, property taxes, insurance payments. Online banks make this easy, since they typically don't have account minimums or monthly fees. You can set up automatic transfers so money is funneled into each account every payday. That way, the cash to cover bigger and unexpected expenses is there when you need it.
Pre-retirement income Social Security replacement ratio
$20,000 69%
$30,000 59%
$40,000 54%
$50,000 51%
$60,000 46%
$70,000 42%
$80,000 39%
$90,000 36%
Source: Aon Consulting, 2008  

Middle income: $40,000 to $60,000

You're smack in the middle of U.S. incomes, but the tips that apply to the folks in the $20,000 to $40,000 bracket also apply to you. Here are the additional steps you need to take:

  • Nuke your credit card debt. The percentage of households with credit card debt really starts to climb as income rises. More than half (54.9%) of middle-income households had credit card debt, according to the Federal Reserve's latest Survey of Consumer Finances, compared with 25.7% in the lowest quintile of income and 39.4% of those in the second-lowest quintile. Credit card debt is a cancer on your finances, because you're paying interest on stuff that has little or no current value. Getting in the habit of paying off your credit cards in full every month will save you a ton of money and help you reduce your risk of bankruptcy. Read "A debt payoff plan that works" for more.
  • Step up your retirement savings. You should be getting your full company 401k match, if a match is offered. Keep boosting your retirement contributions by 1% a year until you're saving at least 10% of your income (15% is even better). The more you save now, the more options you'll have later.
  • Boost your emergency fund. Once you're on track for retirement and your credit card debt is paid off, start funneling the money you once dedicated to debt into your emergency savings account. Accumulating an emergency fund equal to three months' worth of expenses could take you a few years, but that cash can help you sleep better at night.