1. Wages On a regular basis, most employers
tend to increase the wages of their employees at a calculated rate depending on their performance.
This allows people to have more income at their disposal and which they can use to improve their
lives and grow. However, if the employer does not consider the rate of inflation as they calculate
their wages it becomes very difficult for the employees to live off their salaries due to
inflation. With high inflation rates the cost of most items increase and become inaccessible. This
will diminish any aspects of financial growth for the middle class who mainly depend on their wages.
2. Health care In recent years,
the rate of rise in diseases afflicting people is high and more so as a result of lifestyle choices.
Accessing medical facilities can be a challenge especially for those who have no medical
insurance. Most employers offer medical insurance but in cases where an individual is not employed,
they have to dig into their pockets to buy a cover. This aspect of life can eat into
your savings and leave you high and dry, and in a more poorer state than before.
3. Income inequality I’m sure you have heard that the
wage gap between senior managers and middle level managers who mainly constitute the middle class
is very high. There is a shift where more income is distributed at the top
and less at the middle and lower class levels. In most cases senior positions in organizations
earn enough income which if distributed can pay a number of people in the same organization.
There is also the issue of wage stagnation across
middle class earners limiting their financial growth. Globalization has played a role in
this stagnation which has made lower wage earners in some countries such as China
compete with middle class earners in the world. Another factor is innovation and technology
which today can be obtained in a more affordable way, making most high-income earners redundant.
4. Education Education is considered to be a
major stepping stone to financial bliss. However, with the ever-rising cost of education, many
have been unable to acquire college tuition to study or enhance their current education status.
In an environment where college degrees and diplomas are highly rated when seeking employment,
hopes of many have been dashed to pieces. Those who manage to complete their education
through education loans, will have to pay back once employed and this will reduce the take
home package. Starting a career with a student loan hanging on your shoulders is not pleasant
at all. These loans often puts a strain on ones finances and can make it difficult to live well,
considering the other loans one has to deal with, such as mortgage or credit card debt.
5. Home acquisition Most middle-income people
are very ambitious and sometimes get trapped in the mentality of get rich quickly schemes.
This has seen most people acquire properties through mortgages or other form of loans, and
somewhere in the middle due to changes in interest rates or job losses, have seen some of them lose
their property to auctioneers. If the interest rates are not regulated by the authorities
some banks will tend to raise them any time there is an economic crisis. Losing a property
can be devastating and equally retrogressive with detrimental personal scars if not managed well.
Another issue that may arise with property is, if you buy at an inflated price
or when there is a bubble. When the bubble bursts you are likely to be left paying for
a property way higher than the actual price. This will likely sink you further into poverty.
6. Energy cost Another additional strain on
a middle class people is the increase in the cost of energy products. These will include mainly gas,
petrol, and diesel as well as electricity. The effect of this is both direct and indirect and
in some cases you have no control whatsoever. A good example is transport costs where you have no
say in the cost of a ticket from one point to another. Maybe one can try and implement
control measures to reduce wastage and unnecessary consumption in their homes.
Such extra costs will hit the middle class harder and make them poorer as they will dig deeper into
their pockets to cater for the extra costs. It is unfortunate that energy costs
affect everyone whether it is upper, middle or lower class.
7. Retrenchment and job loss Due to poor economic times most
companies are struggling to stay afloat. A number of companies, banks and financial institutions
have been laying off workers in huge numbers. One does not need to guess hard who is most affected
and yes, that’s the middle-class worker. The highest percentage of the mass layoffs are in the
middle-class category. With no form of employment supporting their families will be strenuous
and poverty comes knocking on their door quickly. If you are lucky to get a retrenchment package
this will push you for some time but, if you do not take any action to find ways of producing
wealth you will spiral down into poverty. Companies will also lay off people where
they try to reduce running costs through outsourcing some or all their activities.
8. Lack of financial wisdom Most people throw caution to the winds
when it comes to spending money. There are cases where people have been unable to pay the expenses
because they spent their income in the wrong places such as drinking and being wasteful.
Without a well-developed plan for your finances, you will end up in poverty very fast.
This may not necessarily happen to only middle-class people but can also affect upper and
lower classes. However, the middle class having the highest number of people this is likely to
be seen more in this group. Mismanagement of money and resources is a good recipe to make you poorer.
9. Making Investments It is always advisable
to make investments with what you currently have to increase your income. If you have a
tendency of using all your money that you earn without investing for the future, you are likely
to increase your poverty levels. Make sure that your money is growing wherever it is by investing,
or saving in an interest-earning account, or whichever best options you have at your disposal.
Most people in the middle class might tend to have the illusion that they are rich
and ignore the basics of investing and spending wisely. Without employing proper
investment opportunities, you may not make money preceding to you becoming poorer.
10. Cost of rent Those who rent houses to live in
will admit that paying rent on monthly basis is no easy task. The cost of housing has gone up
tremendously and most people find it hard to afford a reasonably good place to call home.
On the other side, the income one is receiving from their employer or other means does not
increase at the same rate. One is left to pay a high rent while the income remains constant.
Unless one employs other means to generate income your net worth will continue to diminish.
11.Not budgeting A good budget will help
you plan for your finances and ensure that your resources are channelled in the right direction.
You will be able to monitor your expenses and seal loopholes where you could be losing money.
On the other hand, if you do not budget your resources it is like signing your financial death.
Lack of planning is most probably one of the reasons the middle class is getting poorer.
Most people view budgeting as a difficult task that is not necessary, but you are likely to
find out its benefits the hard way when you have been pushed to the brink of poverty.
Budgeting will also help in planning ahead and keep you goals visible at all times.
13. Being too comfortable Being too comfortable in your
status will hold you back and keep you stagnated in one position. You will tend to develop a
comfort zone and ignore the fact that you need to keep on improving yourself and looking for more
avenues or streams of income to enhance what you already have and save you from impending poverty.
14. Living beyond your means Many people live way beyond their means
until they end up in the gallows of poverty. They take loans or borrow heavily to keep up with the
status or class they have created for themselves. In the long run, they will find themselves in the
brink of poverty with loans they cannot afford to pay back. Living within your means will
protect you from losing all that you have and relieve you of the stress that comes with it.
15. Poor mentality A poor mentality is like
a vice that will eat at your mind tying you to poverty for the rest of your life. Never allow
your thoughts to distract you from your wealth generation journey. You need to have confidence
in yourself and in the projects, you undertake without losing focus and direction. Poor mentality
will draw you backwards and you will not be able to achieve your goals as you had set out to do.
Even when things are awfully bad you need to stay afloat, believe in yourself and set your
eyes on the prize. Many middle-class people end up poor because that is all they can see.
They belittle themselves and convince themselves they cannot achieve their financial goals.
Such a mentality is retrogressive and will lead into poverty if not delt with.
16. Showing off It’s not surprising that some middle-class people
have become poorer by trying to live the life of an upper-class person in a bid to show off.
Despite how impossible this looks it actually happens. To impress others financially is not
a wise thing to do. This kind of lifestyle will drive you to take loans and use your finances
carelessly resulting in a quick state of poverty. When it comes to money, compete with yourself by
setting your own realistic goals that you can achieve within your means. Showing off will
leave you poorer and in a state which might be very difficult to exit. Do not allow yourself
to be intimidated by what other people have. Build yourself and live a poverty free life.
17. Financial advice Middle-class people may become poorer
if they don't seek financial advice from experts and end up making wrong money decisions. Although
it comes at an extra cost the advice might just save you from making wrong money decisions,
especially in investments. If for some reason the cost of consulting is high
one can always go to their bank and seek advice from the bank's investment department
which is normally provided to customers at no extra cost.
Well folks, thank you so much for watching. I hope you enjoyed the video and found value in it.
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With that said, have a great day and I’ll see you in the next one.