{"id":144194,"date":"2025-10-25T06:50:25","date_gmt":"2025-10-25T06:50:25","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/144194\/"},"modified":"2025-10-25T06:50:25","modified_gmt":"2025-10-25T06:50:25","slug":"5-money-habits-that-can-keep-the-middle-class-poor-forever","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/144194\/","title":{"rendered":"5 Money Habits That Can Keep the Middle Class Poor Forever"},"content":{"rendered":"\n

The middle class may seem to have it made financially<\/a>, with enough income to survive comfortably and purchase homes, vacations and retire well, but even they aren\u2019t immune to poverty.<\/p>\n

Find Out: 4 Mistakes the Upper Middle Class Are Making With Their Money in the Trump Economy<\/a><\/strong><\/p>\n

Read Next: 5 Types of Cars Retirees Should Stay Away From Buying<\/a><\/strong><\/p>\n

Robert R. Johnson, CFA and professor of finance in the Heider College of Business at Creighton University<\/a>, explained five money habits that can keep the middle class poor forever<\/a>.<\/p>\n

The most common mistake people make is letting their spending increase<\/a> commensurate with their new salary, known as lifestyle creep, Johnson said.<\/p>\n

\u201cFor instance, people move into a bigger apartment or buy a more expensive car or home to reward themselves for receiving the raise.\u201d While you temporarily improve how your life feels, you can\u2019t get financially ahead, and may even fall behind, especially if you\u2019re taking out loans to finance any of these.<\/p>\n

Instead, Johnson urged people to \u201ceffectively invest any money from a raise\u201d and to \u201cact as if you didn\u2019t receive the raise.\u201d<\/p>\n

Johnson laid out the math: If you received a $5,000 annual raise and you invested that $5,000 annually into an investment account growing at a 10% annual rate, you would have accumulated over $822,000 in 30 years based on a single raise.<\/p>\n

\u201cAnd, lest you believe that a 10% average annual return is unrealistic, according to Ibbotson Associates, since 1926 the average annual return on a large capitalization stock index is 10.4%, while investments in long-term government have on average grown annually by only 5.0%,\u201d he explained.<\/p>\n

Learn More: 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses<\/a><\/strong><\/p>\n

Another mistake some middle-class folks make is spending too much on a home, which Johnson said is a form of \u201ccrowding out\u201d other investment opportunities. He cited Nobel Laureate economist Robert Shiller who claimed that housing is traditionally not a great investment because it takes maintenance, it depreciates and it goes out of style.<\/p>\n

\u201cMany people mistakenly believe that real estate is a good and safe investment. They fall prey to stories of real estate values rising dramatically over long periods of time,\u201d he said.<\/p>\n

This doesn\u2019t mean don\u2019t buy a home, but it does mean don\u2019t put more money into one than you need to, and not in favor of other investment opportunities like stocks and bonds.<\/p>\n

While it\u2019s wise to be aware of risks, Johnson finds that people can be too risk averse in their investments<\/a>.<\/p>\n

\u201cFinancial mistakes begin early in life and the biggest financial mistake people make is taking too little risk, not too much risk. Unfortunately, many people allocate retirement savings to money market accounts or low-risk bonds.\u201d<\/p>\n

The surest way to build wealth over long time horizons is to invest in a diversified portfolio of common stocks, he said. Those who have a long time horizon have more time to take bigger risks. <\/p>\n

\u201cEarly in their working lives, people should begin investing in a low-fee, diversified equity index fund and continue to invest consistently whether the market is up, down or sideways.\u201d Known as \u201cdollar-cost averaging,\u201d putting this money consistently into an index mutual fund or ETF \u201cis a terrific lifelong strategy,\u201d he said.<\/p>\n

Many people think that they can avoid market declines by moving their money in and out of the market at key moments, Johnson said. He said this is near impossible, or at least, it\u2019s rare for anybody to do it successfully and consistently.<\/p>\n

Once again, he said, the best way to counteract this tendency is to practice dollar-cost averaging<\/a> in a broad-based stock market mutual fund or ETF, such as one that tracks the S&P 500.<\/p>\n

While getting out of debt is important, Johnson said it\u2019s possible \u201cto place too high a priority on paying down debt,\u201d especially if it gets in the way of other investing opportunities.<\/p>\n

One such opportunity he\u2019s seen people forego in favor of paying down debt is \u201cthe decision to participate in an employer sponsored retirement plan. Perhaps the worst financial mistake anyone can make is turning down free money. If one does not contribute enough in a 401(k) plan that has a company match to earn that match, one is basically turning down free money.\u201d<\/p>\n

The quote \u201call things in moderation,\u201d certainly applies to prepaying mortgages and other debt.<\/p>\n

To Johnson\u2019s way of thinking, any strategy that doesn\u2019t prioritize solid, smart and consistent investing is moving in the wrong direction.<\/p>\n

More From GOBankingRates<\/strong><\/p>\n

This article originally appeared on GOBankingRates.com<\/a>: 5 Money Habits That Can Keep the Middle Class Poor Forever<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The middle class may seem to have it made financially, with enough income to survive comfortably and purchase…\n","protected":false},"author":2,"featured_media":144195,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[177],"tags":[79,85210,18,85211,19,2003,17,6783,234,235,85209,55472],"class_list":{"0":"post-144194","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-creighton-university","10":"tag-eire","11":"tag-heider-college-of-business","12":"tag-ie","13":"tag-investment","14":"tag-ireland","15":"tag-money-habits","16":"tag-personal-finance","17":"tag-personalfinance","18":"tag-robert-r-johnson","19":"tag-upper-middle-class"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/115433480041549525","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/144194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=144194"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/144194\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/144195"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=144194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=144194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=144194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}