We often don’t realize when we’re making poor financial decisions. Many middle class people spend mindlessly on stuff that looks impressive but only ends up draining their savings and keeping them from growing their wealth.
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“One of the most damaging habits is spending more than you earn,” said Christopher William, a CPA finance expert and founder of Balanced News Summary. “This is a common problem in the middle class, as people are often tempted to buy more than they can afford,” he explained.
William notes that this often leads to high levels of debt, which makes it difficult to save for retirement and other long-term investments. “Additionally, if someone is consistently spending more than they earn, it can be difficult to break the cycle.” Below is a list of things you shouldn’t spend money on if you’re middle class but want to become rich.
Student Loans and Other Debt
We all know that education is important, but caution is also needed, warned Jonathan Merry, finance expert at Moneyzine. “I’ve observed the student loan crisis firsthand, and I believe it’s alarming how institutions offer massive loans to young adults from middle-class families without a full grasp of the commitment.”
The main thing here is to steer clear of such massive debts while amplifying your professional skills. Merry said, “Excessive loans and debts will hold back middle-class families, so try to manage debts before taking more and more.”
Speaking on the topic of debt, Carter Seuthe, CEO of Credit Summit Consolidation, pointed out that lots of people in the middle class tend to carry a lot of it, whether that’s student loans or credit card debt. “If you’re not staying on top of this, it can quickly balloon out of your control, and represent a pretty significant drain on your resources,” he said.
“I would say one of the largest expenditures in the middle class that could be holding them back from achieving a better financial status is debt,” Seuthe continued. “Working your way up the financial ladder becomes much easier once you focus your budget and financial efforts on paying off debt and moving forward without those monthly interest payments.”
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Memberships and Subscriptions
Many middle-class people today have memberships to many retail stores, or subscriptions to every online app they need, said Merry. “It might seem cheap, but when these fees accumulate, it will equate to significant expenses.” He continued, “For example, if a $50 monthly gym subscription is only used twice, that’s $25 per visit. Maybe there’s a more economical workout option?”
He added that if you’re subscribed to several streaming platforms but only tune in occasionally, you might be overspending on entertainment as well.
Investing in Depreciating Assets
Many middle-class individuals invest in items that lose value over time, Merry explained. “In my opinion, making flashy purchases, possibly to mimic the wealthier class, often misses the mark.”
He added that new purchases like cars are attractive but not always wise. A brand-new car’s value drops the moment it leaves the dealership. “Being a smart shopper means considering options like slightly older cars with fewer miles, which don’t lose their value as quickly.”
Steven Neeley, CFP and financial advisor at Fortress Capital Advisors shares a similar opinion on depreciating assets. “Finance gurus often beat people up about spending money on things like lattes and avocado toast, but the impact is nothing compared to consistently buying expensive cars over one’s lifetime.”
Neeley also observed that way too many people in the middle class buy expensive SUVs or trucks, like $65k to $100k, drive them for three to five years, then trade them in after the value has depreciated 50% to 70% to start over again. “Doing this instead of buying a reasonable vehicle like a Toyota Corolla or a Honda Accord can easily cost you hundreds of thousands of dollars over the course of 30 years when you factor in the opportunity cost of investing.”
Covering Expenses for Adult Children
One frequent mistake that middle-class families make, according to Merry, is taking care of their grown children’s bills when nearing retirement. “Many middle-class parents fall into this trap, wanting to assist their struggling adult kids since they empathize with their struggles,” he explained, noting that this makes a huge impact on their savings.
“It’s important they learn financial independence rather than depending on you,” he advised. “It might be…
Read More: 7 Things the Middle Class Spends Money on That Hurts Their Chances of Being Rich