Recent economic research has shown that more than half of the American population fall into the middle-class income bracket and earn anywhere between $43 000 to $128 000 per annum. The middle-class includes professional people like plumbers, electricians, engineers, firefighters, teachers, construction bosses, and even culinary people like chefs. Due to rising costs, inflation and the lack of income growth the middle class have found themselves squeezed pretty tightly.
Many issues aside from inflation and lack of income increasing in proportion to inflation such as skyrocketing medical fees have contributed to the current state of our financial situation. Most middle-class Americans are finding it harder and harder to save for our retirement or even our kids’ college funds.
Many of us would like to blame their current financial issues on the economy, however, we forget to look at our own relationship with money and assume responsibility thereof for our own predicaments. If you want to build a financially sound future it’s really up to you to make the best decisions possible for every single dollar you have.
We as the middle class not only provides the bulk of the services that keep our nation going, but we also are the largest consumers. Ultimately we keep our society afloat by driving our own economic growth and investments every time we make a purchase. Here are a few mistakes that we have all made as middle-class people when it comes to our money and what we do with it.
The debt trap
The Federal Reserve Bank of Boston recently released an in-depth study of credit card users and found that just over 65% of card users have money owing on their credit cards and only service the interest. This means that we carry this debt with us month after month and never get out of it as all we are doing is paying the interest off. So what we owe remains the same and only the interest we are being charged is what we are paying.
For most of us middle-class Americans who are just trying to get ahead from a financial perspective, this is a really costly mistake we make the month in and month out. The average interest we are paying on our credit card debt is over 15%. What we should be doing to keep more of our money in our pockets is to set up an automatic full payment of our credit cards every month. This reduces the amount of interest we pay.
All consumers irrespective of which income level you are sitting at would ultimately be better off if we can avoid credit debt altogether. Debt keeps us in debt and costs a fortune in interest rates.
Yes, you have that feeling of being financially flush when you are giving a credit limit and you quickly blow it. All you are left with are months and months of debt at high interest rates. Think about it for a moment and see if you can name a single benefit you have gained from having that credit card? All it does is adding monthly costs onto you, you are now in debt to the banks and your stress levels have increased.