Have you ever wondered why some people just stay in the middle class forever with money
problems they can't get solved and other people again seem to magnetically attract money?
Well, it's probably because one side is good with their money and the other is rather bad
with it, that's obvious.
The big problem is that most people are not aware of the money traps they step into every
day and in this case they can never solve them.
You cannot change something if you are not aware of it.
For this reason, today we have for you the 5 money traps that keep you from living a
life without financial worries with the goal that at the end of this video you can get
right into the implementation and remove them from your life.
So if you are someone who is currently having financial difficulties and don't know exactly
how you got into it and what circumstances led to it, or you are someone who wants to
protect yourself from it from the start and not step into these money traps in the first
place, I'm sure this video can really help you out!
But before we get to the main topic of the video, first of all welcome back and if you
are new on our channel...
We are the Finance Nerds and we try to help you to fix your finances and spread our knowledge
in saving money, budgeting and investing!
And if you want to track your finances and your net worth, check out our video description
or the pinned comment.
You will find the download link to our free all-in-one personal finance tracking sheet
there so that you can track all of your finances in one place and now let’s start!
Now before I am misunderstood: This video is not meant to expose the middle class in
any way or to claim that everyone in the middle class is poor.
I have noticed some differences over the years as I have studied finance, investing, and
the behavior of financially successful people.
In my consulting days, I talked to a lot of people who wanted to start their own business
and came from the so-called middle class.
Through this experience, the difference became even clearer to me and especially in terms
of money, the mentality between the middle class and the financially successful people
is quite different, but I'll come back to the mentality in a moment.
First of all, who belongs to the middle class anyway?
According to a survey by the Pew Institute, about 50% of Americans are middle class.
Pew Research Center defines the middle class as households that earn between two-thirds
and double the median U.S. household income, which was $61,372 in 2017, according to the
U.S. Census Bureau.
Of course, some of them are also living very comfortably, but others are really struggling
financially, living paycheck to paycheck and feeling every month that the money isn't enough
after all.
If you are really serious about breaking out of this cycle and maybe your goal is even
to break out of the middle class, then the focus should not only be on the things that
are moving you forward, but first and foremost the focus should be on the things that are
holding you back.
For example, what's the point of setting up a savings plan if you're losing money every
month due to unnecessary mistakes in your spending habits and therefore can't reach
your savings goal?
This is a difference in mentality between the middle class and the rich: The rich first
concentrate on building up their actual situation in a stable way, i.e. creating a solid foundation
on which they can continue to build.
And in the coming minutes, we'll look at the 5 money traps, why you can't rely on your
9-5 and why impatience makes you poor.
Making debts directly after job start The first big mistake that the middle class
makes is directed at young people, but also at those who are already a little older.
Namely, after the start of professional life and with the first salary, directly take out
a loan and make debts.
I have seen that especially in my environment that many have taken after they have completed
the university and have started to work, directly a loan.
They then directly wanted a new car, a house and of course had to get the latest iPhone.
Because no money was directly there for it, a loan had to be taken up, because "Now you
earn money".
Not only that this is in my eyes a weak character trait to want direct satisfaction, no it is
also by far one of the worst mistakes you can make financially.
There are 3 reasons for this: 1.
you directly reduce your income and can save and invest less
2.
you have the obligation to pay off this sum and if you don't like the job, you are trapped
in a job you don't like just to pay the loan.
3.
you remain inflexible in life.
You only make decisions because you have to pay off the loan.
As an example, this would also keep you from moving abroad for a certain period of time,
even if you would like to.
So what can you do?
Obviously, you should avoid direct gratification and practice patience until you have built
up a financial buffer.
Also, you should avoid consumer debt when you may have been in the job for a while,
because the money you pay for interest should be used for your future!
Relying only on its 9-5 The next trap many in the middle class fall
into is relying on only one source of income.
In contrast, the average rich person has 6-8 sources of income.
Why is this?
It's because if you rely on only one source of income and it goes away, for example, overnight
you have no income.
This can usually happen faster than you think, and for many in the middle class, the thought
circles in their head that a job is "safe".
The solution: a side hustle.
In your place I would put the free time I have into a side hustle to build up a security,
even if it only brings in 500$ you can use this money to pay your fixed costs for example
or use this money to build up your portfolio further.
Now you are wondering which side-hustle you can do or how you can build multiple income
streams right?
If you want a detailed video about side-hustles, write to me in the comments "side hustle"
and I will go into more detail.
But to give you some food for thought, think about what you have a passion for or special
skills that not everyone has and think of 3 ways you can make money doing that.
As an example, if you love writing and reading, you could offer a service as a ghostwriter
on Fiverr and earn $30 to even over $1000 per job.
Try to make money quickly Following on from the last point, earning
a lot of money quickly is also an often-appearing characteristic of the middle class.
They often lack the patience to build something up over a long period of time and crave instant
gratification, whether it's saving money or making money.
For some, saving money is not fast enough and they don't do it at all "because it's
not worth it anyway" and for others, who decide to build something on top of their job, they
want to quit their job tomorrow and earn $10,000 a month.
They set themselves unrealistic time windows where they want to achieve xyz and are then
disappointed why it does not work out, that is a trap that often occurs, into which many
from the middle class step.
As an example, if you decide to build a side hustle and after 6 months you still get little
to no results, you probably think to yourself that it's no good and probably stop, right?
But ask yourself: what is the alternative?
And maybe this thought will help you: If you want to have different results than most,
you have to act differently than most.
Train yourself in patience, persistence and perseverance and I guarantee you will get
out of the middle class and be much better off financially.
Living above their means The next trap many fall into is living beyond
their means, the so-called paycheck to paycheck cycle.
Why do most people live beyond their means?
Because they do not know their real and actual situation.
They don't know how much they really spend per month and certainly not on what, so how
much do you expect anything to change?
Therefore, I recommend you to create a status quo where you track your income and expenses
for 3 months and with these results see where you are spending money unnecessarily, where
you can save and then create a budget where you clearly define your savings and investment
goals.
Relying only on a 401-(k) Plan The next pitfall is that many rely on their
401-k plan.
Similar to point 2, I am a fan of taking personal responsibility and taking my destiny into
my own hands.
Of course, the benefits of a 401-k plan are not to be underestimated, but relying on just
one account for your retirement I think is reckless, because it can still happen that
once you retire that money is still not enough and I'm sure no one wants to have financial
worries in their retirement.
That's why the motto is: precaution.
For example, putting money into a Roth IRA or building your own investment portfolio
or investing in a good mix of ETFs that are suitable for your retirement
And if you want to know how to manage your money, the 5 money lessons in the video on
the right will definitely help you!
If you'd like your personal finance content daily, follow us on Instagram, Twitter or
TikTok.
You can find the links in the description.
And if you enjoyed the video hit the like button and if you haven't already, subscribe
to our channel so you don't miss out!
We hope to see you in the next video.