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Stuck in the Middle – Money Mistakes Middle-Class People Make

Tim Key, Financial Advisor

Tim Key

The middle-class.

Most of us would likely say that’s where we fit if someone were to ask. It’s a group of hardworking people that make a decent income and are just trying to get ahead. Oftentimes though, it feels like we’re struggling just to make ends meet, and the road to get ahead is rocky and lined with many pitfalls.

How do we get to a better place financially? A place with fewer money fights and better sleep because we’re not dreaming about our money problems but, instead, dreaming about the freedom of choice that comes with financial independence. To get there, we must stop making the same money mistakes that the middle class has made for decades.

Money Mistake: Debt

Of course, staying in debt is one of the biggest reasons we struggle to get ahead. Most of our paycheck is already committed to making the payments on things or experiences we’ve already bought. Most of us can agree that we spend too much money eating out. Or if you are like me and still have kids at home, we feel like an ATM as we pour money into their extracurricular activities. Then, there is the dreaded timeshare that one of my clients talked about recently with monthly dues of $200 and no good way to get out of it.

Money Solution: Margin

Many of our budgetary woes can be boiled down to a simple trade-off: we sacrifice what we want for our future for what we can enjoy now. Don’t get me wrong, you shouldn’t have to devote all your time to penny-pinching and not allow yourself to enjoy life. But it’s essential to find a balance and keep this trade-off in mind when considering a new expense.

Money Mistake: Lack of Preparation

Even when people receive an unexpected windfall of money, say they won the lottery, odds are they didn’t just suddenly wake up financially independent. Sure, they may be better prepared to cover an emergency expense or have some more wiggle room (or margin) in their budget, but do they now have the choice to confidently clock out for the last time and stop collecting a regular paycheck? Probably not.

A more likely reality for most Americans is lackluster retirement savings, hoping Social Security will still be around, and if they’re lucky, maybe a pension. But hope is not a plan.

Money Solution: Get Started

Time is the most beneficial tool in working toward financial independence. It’s important to get started as early as possible to give your hard-earned (and saved) money time to grow, and then leave the money there to do just that. 

Many companies offer a match to their retirement savings program [401(k), 403(b)]. For example, if you contribute 3% of your salary to your company-sponsored plan at work, your employer may match that 3% contribution for a total of 6%. So, it could be best to take full advantage of it while being certain to increase the contribution percentage each year when you receive pay raises, bonuses, tax refunds, or even if you win the lottery.

So how does the middle class get out of this rut that we’ve been in for so long? We’ve got to make some changes to how we handle that hard-earned paycheck. We need to determine our financial goals and then put a written plan together in order to reach them. 

Let’s put our money mistakes behind us and start building a brighter future!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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