4 Middle-Class Habits That Are Keeping You Stuck, According to Humphrey Yang
Written by
Peter Burns
Edited by
Jenna Klaverweiden
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Getting rich is the goal of many Americans. Without winning the lottery or getting lucky with a little-known cryptocurrency, it takes a lot of time, effort and patience to become wealthy. Knowing what to do and what not to do can be the difference between being financially secure and being stuck forever in the rat race.
Humphrey Yang, a personal finance expert and popular YouTuber, addressed some of the mistakes the middle class makes with money. In a recent YouTube video, Yang broke down middle-class habits that keep people stuck in place.
Having One Income
Having a career and one income stream may seem normal and secure, but wealthy people often rely on multiple streams of income. Yang pointed out that the IRS has stated the average millionaire has seven sources of income. He explained that while you may earn sufficient money through one income stream, if you lose your job, you must rely on your emergency fund and savings to get you through the hard spell.Â
Even if you have a limited amount of time because of your job, you may be able to make room in your schedule to create other sources of income. Here are a few examples:
- Investing in dividend stocks
- Buying and renting out real estate
- Freelancing
- Getting a part-time job
- Blogging
- Starting a YouTube channel
- Dropshipping
- Purchasing vending machines.
Diversifying your income streams can lead to feeling safer and having something to fall back on in case a disaster happens. On top of these positives, you’ll also have more money coming in.
Not Keeping Up With Your Finances
Making budgets and tracking your spending might not sound fun, but it’s necessary to be wealthy. Keeping track of your finances will help you realize your spending patterns at the very least. You can use this information to find ways to reduce your spending in certain areas and use your money more efficiently. For example, cutting the amount of money you spend going out to eat by $100 per month and investing it will result in large gains over the long term.
Yang also pointed out that as you make more over time, you may not realize your spending will also go up. Lifestyle inflation is the phenomenon where your spending on nonessential items rises along with your income. Getting a raise or a higher-paying job may be a cause for celebration, but using it as a reason to buy a new car, for example, can be dangerous. When you spend more because you make more, you essentially remain at the same level financially. Tracking your finances lets you notice how your spending has changed over time and keep it under control.
Abusing Debt
Every generation has difficulties when it comes to debt. Experian released statistics showing that Gen X’s average credit card balance is over $9,000. Other generations, such as millennials and baby boomers, have an average of over $6,000. Credit card debt may be common, but it is dangerous because of the high interest that compounds over time.
According to Yang, using debt to make purchases to appear rich is a terrible idea. Having a balance on your credit card for a long period adds up quickly. If your debt balloons out of control, you may find your monthly payments paying off only interest and not making much impact on the actual principal balance.
Not Planning Ahead
One of the most important aspects of wealth building that rich people do is plan for the future. The Federal Reserve released data showing that only 54% of American households had some sort of retirement account in 2022. Taking steps to invest your earnings and contribute to retirement accounts like 401(k)s and Roth IRAs is an essential practice for getting out of the middle class.
No matter your age, you can always start saving and investing for retirement. Yang said the older you are, the larger percentage you’ll want to take from your paycheck and put toward your retirement accounts. However, the most important thing is to start.
More From GOBankingRates
