8 Things Middle Class People Splurge on That Actually Keep Them From Building Wealth

When you see a shiny new car in your neighbor’s driveway, you’d think they’re doing well. When your colleague flaunts the latest iPhone, you’d assume they’re financially stable.

But let’s get real here.

Most of the time, these material possessions are what’s stopping middle-class folks from truly building their wealth. It’s not about how much you earn, but how much you save and invest.

In this article, we’re going to delve into the 8 common splurges that are actually keeping the middle class from moving up the financial ladder. And yes, I’m speaking from experience too.

Let’s get started then, shall we?

1) Brand new cars

Here’s the thing about cars – they’re a necessity, no doubt.

But the moment you drive that brand new car off the lot, its value plummets. It’s a depreciating asset, you see. And while that new car smell is intoxicating, it’s also incredibly misleading.

A lot of middle class folks fall into the trap of buying shiny, new cars because they’re seen as status symbols. They stretch their budgets, take on hefty loans, and end up paying off their car debts for years.

What they don’t realize is that this money could have been invested elsewhere for better returns. Or saved up for a rainy day. Or used to pay down other debts.

The truth is, a used car would serve the same purpose and get you from point A to B just as efficiently. Plus, it’s kinder on your wallet too.

2) Expensive gadgets

I’ll admit, this one was a personal wake-up call for me.

Every year, like clockwork, I’d be the first in line to get the latest iPhone. It was a thrill, the anticipation of unboxing a new gadget and the satisfaction of owning the latest tech. It felt good to show it off.

But one day, still paying off the credit card bill for my newest toy, I found myself in a financial pickle. An unexpected expense came up and I didn’t have enough savings to cover it.

That’s when it hit me – my love for expensive gadgets was not only draining my bank account but also stopping me from building any significant savings.

The reality is, last year’s model works just as well as the new one. The features might not be as fancy, but they do the job and that’s what matters. Since then, I’ve become much more mindful about my tech purchases.

In the end, it’s not about having the best of everything but making the best of what you have.

3) Eating out frequently

We all love a good meal at a fancy restaurant, don’t we? The ambiance, the flavors, the experience – it’s all very enticing.

But here’s something to chew on: According to the Bureau of Labor Statistics, the average American household spends over $3,000 a year on dining out. That’s a significant chunk of change that could be put towards savings or investments.

Cooking at home, on the other hand, not only saves money but also encourages healthier eating habits. You control what goes into your meal, and ultimately, into your body.

So, the next time you’re about to make a reservation or order takeout, consider the impact on your wallet and your health. It might just be worth dusting off that cookery book and whipping up something delicious at home instead.

4) High-end brands

Look, there’s absolutely nothing wrong with treating yourself to a designer piece every once in a while.

But when high-end brands become a shopping standard rather than an occasional indulgence, that’s when it starts hampering your wealth-building journey.

Many of us equate luxury brands with quality, and while that’s true to an extent, it doesn’t mean more affordable alternatives lack in durability or style.

The key is to shop smart. Opt for quality over labels. Invest in timeless pieces that will last you years instead of falling for fast fashion trends.

You see, your net worth isn’t defined by the logo on your clothes or accessories, but by the financial decisions you make.

5) Excessive vacations

Travel is a passion of mine. I love exploring new places, meeting different people, and immersing myself in diverse cultures. But I’ve learned the hard way that too much of a good thing can be bad, especially for my bank account.

In my quest to see the world, I found myself spending on trips I couldn’t really afford. I was so caught up in the thrill of new experiences that I didn’t stop to consider the financial toll it was taking.

Now, don’t get me wrong. I’m not saying you should stop traveling altogether. On the contrary, travel is a beautiful thing that can enrich your life in many ways.

But what I’ve learned is to plan better and budget wisely. I’ve started embracing off-peak travel, looking for great deals, and cutting back on unnecessary expenses during my trips.

Travel doesn’t have to break the bank. With a little bit of planning and smart decisions, you can explore the world and build wealth at the same time.

6) Saving too much

Wait, what? Saving too much can keep me from building wealth?

Well, yes. Hear me out.

While it’s important to have a safety net for emergencies and unexpected expenses, hoarding all your money in a savings account isn’t the best strategy for wealth creation. Why? Because the interest rates on savings accounts are notoriously low.

Instead, consider investing a part of your savings. Stocks, bonds, real estate, mutual funds – there are numerous options out there. The right investment can give you returns much higher than any savings account.

Of course, investing comes with its own risks and it’s crucial to do your homework before diving in. But with careful planning and smart decisions, you can make your money work for you rather than just letting it sit idle in a bank account.

7) Subscriptions and memberships

In today’s digital age, we’re flooded with subscription services – from streaming platforms and fitness apps to online publications and delivery services. It’s so easy to click ‘subscribe’ and forget about it.

But those monthly fees add up quickly and can take a significant bite out of your budget.

Take a moment to review all your subscriptions.

Ask yourself, are you really getting your money’s worth from each one of them? Do you actually use that gym membership or could you switch to home workouts? Do you need all those streaming subscriptions or could you share with family or friends?

Trimming down on subscriptions may seem like a small change, but over time, it can free up a substantial amount of money that can be put towards savings or investments.

8) Ignoring the power of compound interest

This is, hands down, one of the biggest financial mistakes many middle-class people make.

Compound interest is a mighty tool in your wealth-building arsenal. It’s not just earning interest on your initial investment, but also earning interest on your interest.

It might not seem like much in the short term, but over the years, it can turn small, regular investments into a substantial sum. The earlier you start, the more time your money has to grow.

So, if you’re not already harnessing the power of compound interest, start now. You’ll thank yourself in the future.

Final thoughts

If you’ve come this far, hopefully it’s clear that building wealth isn’t about earning more, but spending wisely.

It’s about understanding the value of money and making intentional decisions. It’s about separating needs from wants, and investing in things that bring true value to your life.

Being wealthy isn’t just about having a large bank balance. It’s about financial freedom and security. It’s about being able to make choices that align with your dreams and goals.

So, if you’ve been splurging on any of these 8 things, perhaps it’s time to reconsider. Because each small step towards mindful spending is a giant leap towards building wealth.

Remember, as Warren Buffett wisely said, “Do not save what is left after spending, but spend what is left after saving.”

Ponder on that.