Middle Class Habits

Keeping You In The Rat Race

Author

Millionaire Syrup
June 05, 2024

Middle Class Habits

Keeping You In The Rat Race

Working For Less Than You Worth

One common mistake is accepting a salary that's less than what you're truly worth. Many employers try to pay their employees the bare minimum to keep them from quitting. You might have experienced this, where your salary remains stagnant or you receive a small raise that doesn't even keep up with inflation. It's a middle-class habit to just accept this situation because it feels comfortable and familiar.

Breaking this habit can be a game-changer for your financial success. Instead of settling for less, consider exploring other job opportunities. When you move to a new organization, it's more typical to see a pay increase of 10 to 20 percent, which is significantly higher than those meager raises you might have been getting.

More Than You Can Afford

It's a common habit among the middle class when they start earning more money. One common mistake is upgrading to a more expensive car, even if you don't have the money to buy it outright. The allure of lease payments can make it seem affordable, but it actually keeps you stuck in debt and working just to pay off the loan. To avoid this, it's important to either buy a car outright if you have the funds or make sure your car finance payment is within the recommended guidelines. A good rule of thumb is to spend no more than 15% of your annual income on your car, including the payment, insurance, maintenance, and other expenses.

Another area where people tend to upgrade is their home. Banks are willing to lend you a significant amount based on your salary, allowing you to buy a bigger house even with a marginal increase in income. However, it's crucial not to buy more home than you can afford. The general guideline here is to avoid spending more than 30% of your monthly income on housing expenses. This includes your mortgage or rent payment, property taxes, insurance, and maintenance costs. By sticking to these guidelines and avoiding the habit of buying more than you can afford, you'll be on a better path towards reaching your millionaire goals.

One Income
Depending solely on your day job for income puts all your financial responsibility in the hands of your employer, leaving you vulnerable if something unexpected happens, like a job loss. To break free from this cycle and increase your chances of becoming a millionaire, it's important to diversify your income streams. One way to do this is by getting a second job or exploring alternative sources of income. You could consider options like babysitting, becoming an Uber driver, starting an online business, or even investing in cash-generating assets like the stock market or real estate. By having multiple streams of income, you're not only reducing your reliance on a single source but also increasing your earning potential. This can provide you with more financial stability and opportunities for wealth accumulation.

Not Saving For Old Age

Many people don't take action because they lack the tools and resources to help get them started. You might not know what to invest in. Naval Ravikant, in his book "The Almanack," emphasizes that renting out our time won't make us rich. To gain financial freedom, we need to own equity, a piece of a business. If you're not sure where to begin, two options you can consider are index funds and target date funds.

Index funds are a type of investment that tracks a specific market index, like the S&P 500. They offer diversification and can be a good long-term investment. On the other hand, target date funds are designed for retirement. They automatically adjust your investment mix based on the year you plan to retire. The earlier you start putting your money towards retirement, the better off you'll be in the long run.

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