A few other things we don’t do along the way
Take a look at what your interest rates you are paying on your mortgage, car finance or even credit cards. Can you review it with your lender and get a better rate? Dipping into your savings – often we save a bit and then feel it is okay to take some of that money out to pay for things like a trip or new furniture. But you should not do this. Have two lots of savings – one you don’t touch until you retire and a second for emergencies. Remember that a new jacket or that to die for a lamp is not an emergency.
Collecting your change – Too often we just throw all our change into a jar and it fills then we start another one and eventually we have jars of coins all over the place. It’s a great way to save. Throw your coins into a jar and then once a month take it to the bank and deposit it into your savings account. This is a great way to save without really feeling it in your pocket.
Think before you spend – Impulse and emotional spending is a fast way to deplete your money in your wallet. Take a moment to think about it. Do you really need that extra coffee and muffin or even that new shirt that is on sale? In most cases, if you take a moment to breathe you will soon realize that you don’t really need it you just want it.
One of the biggest financial mistakes we make is that of spending without thinking about it. We also learn to manipulate ourselves by justifying why we need something and that we will start saving next month. Too often next month never happens.
Keeping up with the Joneses
Growing up, our parents would tell us, “We don’t keep up with the Joneses, we are the Joneses.” But that was to get us to stop bugging them to get them something our friends had. But keeping up with the Joneses is a genuine middle-class conundrum. There is an element of pressure not to be left behind. There is a fear of exclusion if you can’t meet the criteria of your peers.
So, you’ll be driving home from work one evening, and you’ll see that your neighbors have had their roof painted. You’re worrying about how to pay the utilities this month, but you immediately shift your concern. Now, you are worried about what you’re doing wrong that your neighbor’s doing right. How can they afford to have their roof painted when you can’t?
Now it’s going to make your roof which is in need of a coat of paint look even worse. How can you work the finances so that we can have the ceiling painted soon? What will the neighbors say if your roof continues to look so shabby?
These are real thoughts that the common experiences.
In fact, they can keep you awake at night. Where you’re going wrong is comparing yourself to others without the full facts. What if your neighbor came into an inheritance and used some of the money to have the roof painted? That’s at the expense of having lost a loved one. The members of the middle-class need to learn to ‘stay in their lane.’ Worrying about others and what they have is a pointless way to spend your life. The amount of stress and anxiety you’ll feel is self-inflicted. It does long-term harm to your body. You could decrease your lifespan by worrying about what others have that you don’t.
The members of the middle-class need to learn to ‘stay in their lane.’ Worrying about others and what they have is a pointless way to spend your life. The amount of stress and anxiety you’ll feel is self-inflicted. It does long-term harm to your body. You could decrease your lifespan by worrying about what others have that you don’t.
Not being prepared to take a risk when it comes to work
Everyone has that one friend who took a chance, left their job, and started their own business. Now, you’re either pitying them as they stand in the unemployment line. Or you’re kicking yourself for not thinking of doing what they did. You enviously watch them make their first million and move out of your middle-class neighborhood. While they move onward and upward, you’re stuck in a dead-end middle-class job you hate. You can see your whole life ahead of you. It will be middle-class until the day you die.
So, what’s the difference between you and your friend? Vision and bravery, that’s what it is. Your friend identified a need in the market, or they decided to pursue their passion. Then they dared to close their eyes and take a leap of faith. No one is saying it’s easy. But then again, the higher the risk, the higher the reward. While you were coming up with all the excuses you possibly could, they went for it. They didn’t ask, “What if it fails?” They asked, “What if it succeeds?”
This is a difficult mentality to achieve when you have children, college funds, bills, and a mortgage to take into consideration. There’s no need to take a blind jump off a cliff and start your own business. You can do it part-time while you’re still getting an income from your regular job.
Then when you’ve established yourself and seen that it’s viable, you can enter into it full-time. That’s probably what your friend did. After all, no one’s that crazy that they quit their job and then start a business, are they? Well, the lucky few are. But most of today’s successful business people started part-time. And you can, too.
A failure to understand delayed gratification
Working toward something is not a concept many members of the middle-class are familiar with. And who can blame them? The way marketing and advertising are done today, it’s all about more, more, more. And it must be achieved now, now, now. Falling for that mentality is easy. Subliminal messages tell us not to wait. Waiting is not cool. If you don’t get it or do it now, you’re a loser. You’ll be a laughing stock. You might want to dismiss this as foolishness, but odds are you’ve done it too.
You’ve looked at something in the store that you know you don’t need to have. But it is something you’d like to have. Now, things that you need to have must be purchased. But things that you want to have do not need to be acquired right there and then. But suddenly, you decide on impulse. And soon you’re standing in the check-out queue with your credit card out, ready to be swiped. A month later, the bill arrives. You got instant gratification from buying what you wanted. And now you have long-term buyer’s regret because you have to make those monthly payments.
If you want something enough, you should be prepared to wait for it. Using a credit card to purchase something that you should be saving for instead is unwise. The accumulated debt can push you to the precipice of financial self-destruction.
There’s nothing more satisfying than saving for something and paying cash for it. You can take a certain amount of pride in that. Delaying the gratification makes the purchase even more significant. You keep yourself out of unnecessary debt. And you have a new prized possession that is all yours.
Not facing reality
One of the fatal financial mistakes members of the middle-class make is not dealing with the reality of their money matters. Instead of confronting your escalating debt, you prefer to stick your head in the sand like an ostrich. If you don’t acknowledge it, it will go away. At least, that’s what you think (or hope) might happen. Unfortunately, that’s not how it works. Pretending you’re not in financial trouble only makes the problem worse.
If you’ve overextended yourself in terms of debt, but you do nothing about it, the vicious cycle will perpetuate itself. You’ll make more deficit to service existing debt. Your whole life will become about working to pay off debt that paid off other debt. That’s not a quality existence.
It might not be the most beautiful experience, but you might need to consult a financial adviser and lay your cards out on the table. It can be hard to admit you’ve messed things up by living beyond your means. But think about the alternative. Better to tell a consultant who can help you before you lose it all.
Money problems can become marital problems. They place enormous pressure on a relationship. The strain can become so high that the relationship breaks down.
If one of you is pretending your finances are fine when they’re not, you can drive your partner to a tipping point. This is something you want to avoid. If the relationship breaks down to the extent that you get divorced, it’s a sad situation emotionally. But, not to sound cold, it’s an even sadder situation financially. It will only increase your debt and your monthly expenses. To avoid this eventuality, seek financial help before things go too far and nothing can be salvaged.
Where we come from
People in the middle-class tend to come from a middle-class background. There are certainly exceptions. Some people had an upper-class upbringing who now live a middle-class life. It’s a massive mindset change. Very often, this group will have champagne tastes on beer money. It’s hard to accept that you don’t have the money for the finer things in life. And if you’re going into debt to get them, you’re placing your financial future at risk.
Yet another group of middle-class people comes from a low-income background. For them, the temptation is to make sure their lives and the lives of their children are nothing like the life they led growing up. In doing this, they can go a little overboard, and wrack up debt they can’t service.
In a lot of cases, they lack the financial planning skills needed to manage an income, pay a mortgage and bills, and still have savings left over. They were raised in a hand-to-mouth existence, and so the culture of savings has not been inculcated in them.For those that grew up in the middle-class and remain there, they don’t know anything else.
Many of the habits they acquire when it comes to money come from their upbringing. However, being middle-class 30 years ago is not the same as being middle-class today. Life was a whole lot simpler back then. The demands on your money were not so many. It was not as easy to incur debt as it is today. It’s normal to want to give your children more than you had growing up, but you can’t do it at the risk of bankruptcy. You need to be objective about what you can afford and not succumb to the temptation of debt.
Not shopping ‘smart’
Leading a middle-class existence is a hectic life. You have a full-time job, children who do various activities, social clubs, and responsibilities to your extended family. It feels like every minute of your day is jam-packed with something that needs to be done. So, when it’s 6 p.m., and you’re tired after a long day at work, you don’t feel like cooking. You order pizza, thinking it’s not that expensive. But add up your pizza bill at the end of the month, and you’d be surprised.
It’s Saturday morning. This is the only time you have to go grocery shopping. You don’t look to see which shops have discounts and where you can get things more cheaply. There’s no time. So, you go to the nearest grocery store and do your shopping.
You don’t have a list, because you’re in a hurry. You haven’t planned meals for the coming week. You’ll wing it. Afterward, you arrive home having bought a whole lot of things you didn’t need. And when you realize that you didn’t buy spaghetti, it means another trip to the shop where ‘offers’ tempt you to spend more.’ As an experiment, go an entire month without ordering take-out. You’ll save more than you think. Next, plan your meals for the week. Make a shopping list and stick to it. Go shopping once a week.
Get everything you need so that you don’t have to go back. Look out for stores that offer lower prices. Set yourself a budget each week. Try to spend less than your budget and use the extra money for a family treat. If you struggle to cook during the week, do it in one large session over the weekend and freeze your meals. Don’t be surprised if you halve your grocery bill this way: it can be done!