Middle Class Money Mistakes Keeping You in the RAT RACE Forever
Are you stuck in the rat race, never feeling like you're getting ahead no matter how hard you work?
In this article, I'm going to share with you the top money mistakes that many people make and why these mistakes keep them from ever achieving true financial freedom.
Money is a tricky subject and oftentimes it can be difficult to break out of our own limited beliefs when it comes to managing our finances.
There are many money mistakes that people often make which keep them from achieving wealth and financial freedom.
Let's find out what these mistakes are, so that you don't make the same mistakes and you don't need to waste the best years of your life working.
Living Beyond Your Means
This is one of the most common mistakes that people make.
It involves spending more money than you make and relying too heavily on credit cards for your everyday expenses.
CNBC reported that 63% of Americans are living paycheck to paycheck — including nearly half of six-figure earners.
The problem with this approach is that it can quickly spiral out of control, leading to excessive credit card debt, higher interest rates, and an inability to truly save and invest for the future.
Living beyond your means also limits the amount of money you have available to pursue other wealth-building activities such as investing in stocks or real estate.
Not only does this keep you from building wealth, but it can also leave you feeling overwhelmed and stressed out because of all the bills piling up.
When you spend more money than you make every month, it becomes harder and harder to pay off debts and even harder to keep up with day-to-day expenses like groceries, utilities, and car payments.
This can lead to an increased reliance on borrowing money just to stay afloat.
The key takeaway here is that buying expensive and luxurious things may seem like a good idea in the short term but it will cause more problems in the long run by hindering your ability to build wealth over time.
Therefore, if you want financial freedom then it's important that you live within your means and put extra money into investments rather than simply consuming more goods and services.
Not Investing In Yourself
This could mean anything from taking the time to learn a new skill or develop a hobby, to not making an effort to advance their career or start their own business.
Investing in yourself is one of the best ways to increase your earning potential and build wealth long-term. It may require a significant amount of time and effort upfront, but the payoff can be well worth it.
Not investing in yourself could also take the form of not getting a quality education or failing to stay abreast of industry trends and developments.
Taking classes, attending seminars, traveling for work or leisure - these are all great investments you can make in yourself that will help you stay ahead of the curve and better position yourself for future opportunities.
Not investing in yourself could also mean not taking care of your physical and mental health.
Taking care of your body and mind is essential for leading a productive life, both professionally and personally.
Finding ways to reduce stress, staying active, and eating healthy are all key ingredients for success.
There are plenty of resources available today such as apps or online tools that can help you stay on track with your health goals.
Ultimately, investing in yourself is one of the best things you can do if you're looking to break out of the rat race.
Developing new skills, getting educated, and taking care of your physical and mental health - are all critical steps you need to take if you want to succeed financially in the long run.
Relying On A Full Time Job
Mistake number three: thinking a full-time job is the only option.
This is really common amongst our parent’s generation and it really isn't their fault.
When they were growing up, the only option was to get a full-time job and work for their whole lives. Their mindset is ingrained and passed down through generations but it's just not true any longer.
There are countless different ways to earn a living now and you shouldn't feel restricted by what society or your family considers to be a real job.
There are people earning way more than our parents ever did working purely online from wherever they want.
In fact, many people even build multiple sources of passive income and never have to work a normal job again in their lives.
If you can find ways to make income passively, remotely, or even by doing something that you love, take that opportunity and build your way out of the rat race.
Too Much Debt
The fourth mistake people make is taking on too much debt, as they are essentially trading their future wealth for current consumption.
A study from the Federal Reserve Bank of Boston has revealed that a staggering 65% of people who use credit cards have outstanding debt.
This means that almost two-thirds are suffering from the burden of credit card debt.
It’s a concerning trend that could cause further financial instability if not addressed by greater education and support.
This can lead to a cycle of debt that never ends, which leaves you feeling stuck and unable to move forward financially.
Taking on too much debt is an easy trap for people in the middle class to fall into because credit cards are so readily available and oftentimes offer attractive rewards or low-interest rates which make them seem like a good option when making purchases.
However, if not managed properly, these debts can quickly become unmanageable due to high-interest rates or fees associated with them.
Furthermore, when carrying large amounts of debt it becomes harder for individuals to save money as they must devote more resources towards paying off their balances each month instead of putting aside funds for future needs such as retirement savings or emergency funds.
So think carefully before you decide to take on a huge debt in the future.
Getting Married And Having Kids Too Early
Weddings are expensive, children are even more expensive.
Compound interest takes time to work, so what happens when you spend all of your money on a wedding and starting a family when you're too young?
Your money simply doesn't have time to grow if you get married and have kids when you're young.
It's likely that your financial commitments will only grow and your monthly savings and investments will only shrink.
The money you could have saved and put to work during your twenties will instead be gone much quicker than you would have thought possible.
If you save and invest wisely through your twenties and wait until your 30s to start a family. Because of compound interest, your savings of the last 10 years will be there for you to fall back on.
You'll also be much more mature and in control of your own finances, so it's more likely you'll continue to save and invest even after you have children and less likely that you'll overspend on your wedding.
The average cost of a wedding in the US in 2021 was $28,000. Some people don't even make that much in a year!
Spending Too Much On Housing
Mistake number six: spending too much money on a house or paying too big of a down payment on it.
There's a huge temptation to try and keep up with people you see on social media, and you think that this means you need a home which costs 10 times your annual salary.
That is a big mistake, which results in massive mortgage repayments and keeps people poor as all their money goes towards the home, and leaves little money remaining for saving, investing, or to cover emergencies.
This can lead people into debt to cover other expenses and can even lead to defaulting on the home, which was a main feature of the 2008 financial crisis.
On the other hand, putting too big of a down payment on your house can also be a mistake.
One of the reasons real estate is such a powerful investment is that it gives you easy access to leverage.
By putting down a large deposit, you're lowering this leverage and restricting the percentage gain you can return on your investment.
Keeping Up With The Joneses
The next mistake I often see is trying to keep up with others who have more money than you do.
This behavior is often driven by status anxiety;
when you compare yourself to others, you may feel as though your own situation is not good enough or that you are doing worse than your peers and this can lead us to make poor decisions financially.
When you focus on competing with others who have more money than you, it’s easy to lose sight of your financial priorities such as saving for retirement, paying off debt, or investing in yourself or your business.
This means instead of putting energy into making your own financial dreams come true, you are too busy worrying about keeping up with someone else's lifestyle.
The best thing you can do is shift your focus back onto yourself and your own goals.
Start by developing a budget that works for you, so that you stay within your means while being able to put aside money towards reaching your goals.
You don't have to spend any unnecessary money just because other people are doing it;
take charge of what works best for your life and make sure you always stay on track!
Spending Big Bucks On Cars
Mistake number eight that both rich and poor people make is spending way too much money on cars.
Whether you're buying on finance with extortionate interest rates or if you're a cash buyer getting a brand new car, there is a huge possibility that you're wasting money.
I understand that it's nice to have a brand new flashy car with all the added extras, but this financial mistake could be costing you your future.
Think about where you'd be in 10 years if you were investing that $600 per month instead of spending it, the opportunity cost is enormous.
On top of this, you have less money to put towards other things and you may be in real trouble if any emergency arises.
You'll also be restricted when it comes to getting a mortgage for a home as the bank will say that you have high monthly commitments, so lending to you is riskier.
Always shop around, look at used cars that will fulfill your needs, and remember if you can't afford to buy it twice, then you probably can't afford it.
At the end of the day, it’s important to remember that you are in control of your financial destiny.
Avoiding these common money mistakes is essential if you want to break free from the rat race and achieve true wealth and financial freedom.
With dedication and a focus on sound financial principles, anyone can create their own path toward long-term success!
- Ivan