Habits that perpetuate a life of financial struggle for the middle class, paycheck by paycheck
In an insightful article titled "Die sieben verdeckten Verhaltensmuster, die die Mittelklasse Amerikaner am Ziel des monatlichen Rundgangs haben" (translated as "The Seven Hidden Behaviors that Middle-Class Americans Have at the Goal of Monthly Spending"), the author delves into the financial habits of middle-class Americans. However, the identity of the author remains unavailable.
One of the key findings in the article is the practice followed by wealthy individuals to save 10 to 20% of their income, prioritising savings, and automating the process. This contrasts sharply with the reality faced by many middle-class families, as a survey by LendingClub reveals that over 60% of Americans live paycheck to paycheck, including middle-class families with decent salaries and college degrees.
Research indicates that young people from higher-income backgrounds tend to have better financial literacy than those from lower-income families. However, the article points out that not having a systematic savings plan is a common issue among middle-class earners. They often spend first and hope to save whatever is left at the end of the month, instead of treating savings as a non-negotiable bill.
The article also highlights the danger of keeping up with lifestyle inflation. After a promotion or raise, expenses often expand to match the new income, making lifestyle expenses fixed costs that are difficult to scale back. Another wealth-killing habit among middle-class families is the tendency to buy status symbols instead of building wealth. Expensive car payments and designer items could be invested, potentially leading to hundreds of thousands of dollars in lost wealth over 20 years.
The author emphasises the importance of building an emergency fund, stating that it is the foundation that makes everything else possible and is the difference between temporary setbacks and financial disasters. Living without an emergency fund turns every unexpected expense into a crisis and can have a psychological impact.
The article also sheds light on the impact of financial stress on decision-making abilities. Financial worries can cloud judgment, leading to impulsive financial decisions. Experiments have shown that financial stress can have a similar impact on thinking skills as losing a full night's sleep or taking a 13-point drop in IQ.
The good news, according to the author, is that every single one of these habits can be changed. It's about making small, systematic changes that compound over time. The author suggests starting with one habit, such as automating savings or building a small emergency fund, or finally learning what compound interest actually means.
The article ends by mentioning three related stories from the author's website: "If you've gotten through these 5 life challenges, you're probably more resilient than 95% of people", "If you're over 60 and can still do these 10 things without help, you're living proof that age is just a number", and "5 common habits that sabotage happiness in your 60s and beyond (but nobody talks about)". These stories serve as a reminder that while financial management may seem daunting, it is a journey that can be navigated with resilience and the right mindset.
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