12 Middle Class Money Mistakes That Are Keeping You Poor

Despite my best efforts to be financially responsible, working hard, and getting raises, I still found myself living paycheck to paycheck. This isn't just my reality—78% of Americans live paycheck to paycheck, including 47% of those making over $100,000 a year.

There are many reasons people give: high inflation, greedy employers, or government policies. While those may play a role, I still believe it’s absolutely possible to build wealth in America.

The key is to avoid common middle-class money habits. Here are 12 financial pitfalls that, if you stop doing, can drastically improve your finances.

1. Having a Car Payment

A car payment is one of those things people don’t question, especially when living paycheck to paycheck. Many think it’s fine to have a car loan, particularly with good terms.

But the average car payment in 2024 was $532, or about 14% of a typical person’s take-home pay. Imagine if you invested $500 a month instead:

Personally, I recommend living frugally and saving up to pay cash for a cheaper car. My first car was a $3,000 Honda Civic, and my second was an $11,000 Honda CRV:

Both were reliable, easy to fix, and freed me from the burden of monthly payments, which set the foundation for my financial freedom today.

2. Spending More Than You Earn

It sounds like common sense, but the average household has almost $88,000 in credit card debt. I’m not anti-credit card; I use mine for things like free flights to Europe. But if you’re carrying a balance at 28% interest, it’s draining your finances faster than you think.

Many people live paycheck to paycheck, not because they don’t earn enough, but because they’re spending too much. It’s essential to differentiate between needs and wants, set a budget, and cut back where necessary.

You can use the cash envelope system or use a budgeting app to help keep track of what you’re spending.

3. Spending Selfishly

Giving back is often overlooked when you feel financially strained. The average American donates only 2-3% of their income to charity, and half don’t give at all.

I used to feel the same way, but five years ago, I started giving away 10% of my income, no matter how little I earned.

This shift in mindset made me more grateful, less focused on material things, and motivated to earn more. If you’re not already tithing or giving back in some way, I highly recommend it—it will make you feel better about yourself.

4. Buy Assets, Not Stuff

Most people have a consumer mindset, spending money on things that lose value over time. I’ve shifted to a mindset where I buy things that increase my net worth. Instead of buying a Coke, I’d rather buy shares of Coca-Cola.

This change makes life more exciting, as I focus on assets like real estate and stocks that grow in value, instead of depreciating items like cars or gadgets. Every purchase is an opportunity to either grow or reduce my financial freedom.

5. Drinking as an Escape

For me, the negatives of drinking outweigh the positives. It’s expensive, reduces productivity, and can become a way to avoid dealing with real problems.

If you’re not where you want to be financially, it’s crucial to face your issues head-on, whether it’s overspending, poor impulse control, or bad financial decisions, rather than turning to alcohol or other distractions.

6. Increasing Spending After a Raise

Lifestyle inflation is real. I’ve experienced it myself, going from making $10 an hour as an office cleaner to earning much more.

Each time I got a raise, I felt the urge to spend more—sometimes, I did. But I’ve learned that more money doesn’t necessarily make you happier. Instead of upgrading your lifestyle with each raise, save that money and invest it in your future.

7. Buying the Wrong Discounts

I used to buy things just because they were on sale. Turns out, that’s a dumb way to spend money. Now, I focus on buying discounted assets like stocks and real estate when prices dip, rather than consumer goods.

When stocks crash, I buy more; when real estate prices drop, I invest. This strategy has helped me build wealth over time.

8. Believing the System Is Rigged

It’s easy to feel like the system is rigged, especially with rising home prices and stagnant wages.

But focusing on things you can’t control, like government policies or inflation, is a recipe for frustration. Instead, I focus on what I can control: my work ethic, spending habits, and financial choices. Taking extreme accountability for my situation has given me more control over my life and finances.

9. Listening to Your Friends

Be cautious about where you get your financial advice. I don’t take money advice from anyone whose financial situation I wouldn’t want to be in.