The middle class is probably the most important one for the economy. However, they are also the people who seem to be constantly struggling. Their average income falls in the $42,000-125,000 range. Their living costs and inflation makes things very hard for them.
These struggles are usually due to certain financial mistakes the middle class makes. They have a limited amount of money and investing it could be a risk. Hence, below are some money mistakes to avoid in order to lead a good life even when you’re middle class:
1. Piling On The Debt
Recent studies have shown that most credit card users have a great amount of debt on them. basically, they spent money they didn’t have in the first place. This debt only increases every month as users don’t bother to pay it off. The interest racks up separately.
Of course, credit cards come in handy when there’s an emergency. However, the interest rates on credit cards are above 15% on average. This means that middle-income families need to be extra wary of utilizing their credit cards.
Controlling finances would hence mean paying credit card bills every single month. If this process is automatic, it’s even better. This way, one simply won’t have a choice. They would save on interest and also control their spending a little more each time.
2. Skipping On An Emergency Fund
Middle-class families may think living from paycheck to paycheck is fine as long as they don’t run into debt. However, this is sadly not the case. One simply needs to set aside some money for a rainy day.
Emergencies can crop up at any moment. In order to cover them, one should have some money laid by. Otherwise, they would have to sell something or take out a loan. By saving some money each month, you are assured that there’s a backup handy. Even if you have insurance, keeping some money aside would mean you are controlling your finances well.
If one doesn’t have any money left over, they should start offering assignment help or work part-time to make up an emergency fund.
3. Giving Less Importance To Retirement
All too frequently, the middle-class neglects giving importance to their retirement fund. However, this is what would save them from a lot of problems when they’re getting on in years. Basically, delaying your retirement fund is a huge mistake.
One may think they have other financial obligation to deal with before saving up for retirement. However, retirement is just as worthy a goal as paying off student loans or buying a house and car.
Retirement funds need time to grow and mature. The sooner you start on them, the better. As soon as you start saving for retirement, compound interest kicks in and starts working in your favor. Start with small amounts, and raise the contributions when you can.
4. Spending On The Wrong Things
Many middle-class people tend to sink huge payments for something that is flashier than long-lasting. Perhaps the age of social media has something to do with this. Whatever the case, there is no doubt that a few moments of instant gratification can put a huge burden on a middling income.
The most common of these purchases are cars. Car leases can cost over $500 per month. This is a huge amount of money for a middle-class family to pay long-term. In the meantime, they have the car but are also paying for its fuel and maintenance. The car itself is depreciating rapidly. Hence, middle-class Americans especially should take advantage of public transport. If not that, they should opt for second-hand cars until they can pay for a new one in full.
Without the middle class, an economy would find it very hard to stay stable. It is the middle class which requires education and provides teachers. The same goes for chefs, plumbers, managers, and firefighters. In order to keep this class from shrinking, there are certain financial habits to be adopted. The quicker we realize this, the more financially comfortable we’d be.
If financial mistakes get too serious, middle-class families may not get a retirement fund. They may not even have enough to pay for college. The resultant ruts or debt could be crippling for future generations.
Teresia Clark is the writer of this blog. She is also a Financial Advisor and guides people regarding their matters related to personal finance. She also conducts workshops and delivers lectures on how people can manage their money.