These Spending Habits Will Keep You Middle-Class

Do you feel like you never have enough money? If you’re making a good income but still broke it could be the way you spend. What I’ve learned over the years from working with many different families over the years is that middle-class spending habits that involve excess (usually in an attempt to “look rich”) will just make you poorer in the long run.

I’m always amazed at people who tell me they don’t have enough money, yet they’re earning a good income. The problem is often their over-spending. I believe that life is best lived when it’s balanced. You can enjoy life and have nice things and fun experiences without going overboard. Having that balance can help you feel like you’re living the good life while still actively growing your net worth.

If only we could learn as a nation the practice of moderation. I call this art selective spending, and I discuss exactly what that is in my article How Selective Spending Increases Your Net Worth.

We love to buy in America and this fascination with spending is keeping so many people broke. I want to do my part to break this obsession so I compiled a list of all-too-common spending issues holding so many people back. See if you have any of them:

Too much house

It’s no secret that the average home in the US has progressively become larger through the decades. The average home in the US is now around 2,600 square feet. In 1970, it was 1,400. In my opinion, we should revert back to 1970.

With a big house comes big headaches—and bigger expenses. Many people own large homes and then fill it with a bunch of stuff they don’t need, such as extra décor, more toys for the kids (see below), more electronics, more clothes and shoes, more sporting equipment and just more, more, more. Also, the more you have, the more you have to not only pay for but manage. More means more you have to protect, keep track of and organize. You also pay more in heating and cooling.

Look at Warren Buffet, one of the richest men in the world. Mr. Buffet still lives in the home he bought in 1958. Although it’s a very sizable 6,570 square feet, he could easily afford more. Instead of throwing a bunch of money at his primary residence, he instead has kept his financial focus on investing in businesses (via stocks and also creating his own).

So when a billionaire doesn’t feel the need to buy a bigger home, then why might you? Huge homes are overrated. Many people who live in them aren’t even wealthy. They may earn a higher income but they’re net worth isn’t that high at all—because they’re spending it all on their house.

Fancy restaurants

Eating out is fun, no doubt. And I’m not saying you should never do it. I think having having a good meal with great service is one of life’s great pleasures. But if you want to increase your net worth and create more financial freedom in your life, you have to find a balance between pleasure now and saving for the future.

I know people who eat out at expensive restaurants all the time—daily, in fact. If you’re a multi-millionaire, or this is the way you’re making important connections that bring in revenue for your business, then go for it. But if not, then you could be indulging a little too much.

I remember doing restaurant experiments with my ex-boyfriend. We had plenty of extra money so we decided to start treating ourselves to expensive dinners out. Surprisingly, we found that the food wasn’t any better than most mid-range restaurants. It felt luxurious, yes. But every time we would pay for one of these meals, we felt like we were getting ripped off. So eventually we went back to more modestly-priced meals. To us, it wasn’t worth it.

This was before sites like Groupon and came on to the scene. Nowadays, you can find a coupons for 20% or more off your meal, even for nicer places. (If you’re one those people who’s too embarrassed to use one of these coupons, stop! You can take the money you save each time and invest it, which will create even more money for you in the long run!) I’m all for doing this way. You get to treat yourself to luxury without overspending.

That is, if you’re not doing it all the time. If you’re still working on becoming wealthy then blowing a bunch of money on eating out is a waste—unless your dining choices happen to be Taco Bell or McDonald’s. Going out to a sit-down restaurant is great if you limit it to two to four times a month. But doing it two to four times a week can wreak havoc on your finances.

Expensive cars

Rumor has it that Amazon CEO and world’s richest man Jeff Bezos drove an old Toyota Camry for years after launching Amazon—even when he was already worth millions. On the flip side of that, how many Americans drive newer cars that cost more than the owners net worth? Are you one of those people?

We’re incredibly wasteful in this country. (I’m sure there are people in other countries who are wasteful, too.) Getting rid of decent looking cars that still run well is one of the wasteful actions Americans like to do regularly.

While I’m all about having standards and not driving a clunker if possible, I think life is best done in balance. Buy a vehicle that looks presentable and runs well if you can but getting into debt—or draining your bank account—to buy anything more than that can keep you from increasing your wealth. It’s better to pay cash for a decent car and not buy a nicer car just to try to impress people, as I discuss in Stop Spending Money to Impress People (and Get Rich Instead).

Car payments make the lender rich and you poor. It is possible to pay cash for your car, even if you’re not rich, as I discuss in Never Have a Car Payment Again (Even If You’re Middle-Class).

Big-ticket optional items

Another ex-boyfriend I had (yes, I have my share of exes!) wanted to buy a boat simply because he “liked them.” I told him he was crazy because 1) He was still paying on his truck 2) He was still paying on his house 3) He wasn’t a millionaire 4) A boat is a depreciating asset 5) Most of the time, the boat would end up sitting unused while he wasted money on dock fees. By the time I was finished explaining all of this, I had changed his mind. (I think. Maybe he bought one after we broke up.)

Other useless big-ticket items that Americans like to waste their hard-earned money on are things like ATV’s, motor bikes, mopeds, giant TV’s, etc. If you don’t mind working your butt off, love your job and make tons of money, by all means, buy away! But if you hate your job and/or don’t make a lot money, yet own one of these items, I have to ask why?

That’s money you can invest so you can multiply your wealth through compound interest. Over time, the thousands of dollars you save can grow into an even larger nest egg. This mindset is one of the primary factors in differentiating the poor from the wealthy. The rich understand that saving, say $5,000 by not buying a motor bike, adds up to much more than 5K in the long run. A person on the road to great wealth will take that 5K, invest it and over time, turn it into 20K.

quote: It's not your salary that makes you rich, it's your spending habits.

Excessive and expensive vacations

Vacations are essential to life. Everyone needs to take a break now and then. It’s one of the pleasures in life and is an investment in your mental well-being. But some people seem to always be going somewhere—road trips every other weekend; flights to other cities or even countries ten times a year.

I know a woman who constantly travels, from trips with her friends to very frequent flights on weekends to see her family in another city. She hates her job and feels stuck in it. Yet, with all of that money she’s blowing on vacations, she’s trapping herself more and more in a career she deplores. I explain how spending keeps you trapped in my article How to Free Yourself From Debt and Live a Better Life.

Going on lots of vacations can be fine if you’re not trying to build your net worth (or it’s for work). But since you’re reading this blog, I’m going to assume you’re still working on securing your financial future and want to make a change.

Like all things that I preach on this blog, life needs to be about balance. For years I worked on a business and rarely took a break. That’s not good. But always going somewhere isn’t good either. Every time you travel, that’s money you’re spending that could be invested.

Even worse is if you put it all on your credit card and end up paying interest on it. With the average interest rate on a credit card being 14.14%, putting an optional vacation on a card when you don’t have the money to pay it off the following month is a disaster. Conversely, if you cut down on trips and invest the money you save into dividend stocks (which I discuss in my blog post Why Everyone Should Own Dividend Stocks (A Beginner’s Guide) then you can passively earn 8% on that base amount as opposed to paying the high interest. For more on the beauty of passive income and how it can greatly increase your wealth, check out my article 10 Easy Ways to Earn Passive Income (A Beginner’s Guide).

Too many toys for the kids

I mentioned in another blog post that I know a family who’s kids have so many toys, you can’t even walk through their living room without the fear of breaking a leg. The site of it all makes me cringe. In this case, it’s not about whether or not they can afford it. It’s just disgusting. No kid needs that much.

But apparently, they’re not the only ones. I found a study done by the Toy Industry Association that found that the average American home houses 71 toys, which cost around $6,500. In my opinion, that’s about $6,000 too much.

And it’s not just the toys. It’s the electronics, too: iPads, cell phones, TV’s, laptops and more. These help entertain kids, giving parents a much-needed break, I’m sure. But if your family of five has eight iPads, that’s a problem.

An even bigger issue is the sense of entitlement of this buying can create. Parents want to raise great kids—but all of this stuff can make them believe that things will just be given to them without any effort on their part. In other words, it will make them spoiled.

Over-priced department stores and designer labels

I’m all for looking nice and dressing the part, but it doesn’t have to cost you a fortune.

There are plenty of people out there who wouldn’t dare shop in a discount store. They’re so worried what their friends would think if they saw them. It’s like high school all over again. But unless you’re already a billionaire, why would you pay $100 for a shirt when you can go to a discount store and get the same shirt for $30? Personally, I don’t like getting ripped off. It makes me feel like a sucker.

Don’t ever let anyone make a fool out of you. Don’t pay $200 to pay for a pair of jeans that cost the manufacturer $2 to make just because a particular logo was slapped onto them. Doing things like this just to impress other people and have bragging rights is just stupid. It’s better to make wiser financial decisions and grow your net worth.

Trinkets, knickknacks, bric-a-brac and other items with goofy names

Being a financial writer makes me incredibly observant when I go to other people’s homes. (Pretty soon, no one will invite me.) I particularly notice all the “stuff” that people have—101 candles, 5 pitchers, 2 toaster ovens, a figurine collection that spans an entire wall…Extra items serve no utility, take up space and cost money.

I do believe a person’s place should be made nice and comfortable. But just like clothes, you can find great deals on home décor. Even better, keeping our spaces streamlined and free of clutter looks better and more organized, as well keeping more money in our wallets.

Women are particularly bad about buying useless crap. Most of us love to shop. And when we’re in those stores we find pretty things like coasters, pictures, decorative boxes, pillows and more. It’s hard to pass up so many beautiful things. But more often than not, it’s better left in the store. If your space already looks nice, don’t waste money on more items that serve no purpose other than to collect dust.

The “Spend Versus Save” Sweet Spot

I’m not for living life miserly or being so cheap I never take a vacation or live in a dump. I think a life lived balanced is the best kind. The whole purpose of this blog is to help you live the good life while on your road to financial freedom.

By all means, buy your kids some toys, go on vacation, eat out at a nice restaurant sometimes and don’t feel bad for buying a few candles. Just look for discounts along the way, buy only what you can easily afford and don’t over do it.

Too often in American society we think more is more. But sometimes more is less. Too much stuff means clutter and wasting time searching for items amidst the “junk.” Too many dinners out means too much money spent on food—and probably a bigger waistline. Too many trips means less focus on our career goals and perhaps some unnecessary debt.

Too much of something also means it can loose some of its value. If you’re always going on vacation, the vacations become less special. This happened to me. When I lived in Europe in college, I traveled a lot. At first, seeing great European cities like Venice, Rome, Paris and London were exciting. Everything was fresh and new. But as time went on, it wasn’t as exciting anymore. I wouldn’t give up those experiences for anything. It’s just an example of how even the most exciting people, places, experiences and objects can lose their “newness” with enough exposure.

New objects quickly lose their value as well. As soon as you drive a new car off a lot, it drops roughly 20% in value. And try reselling something like a new laptop or toy you just bought. You won’t get the amount you paid for it even if you never used it. Think about that the next time you want to buy something you don’t really need.

Likewise, if it’s something you’ve been wanting or needing for awhile and you can easily afford it, then I say why not? Sometimes we do actually deserve it and indulging makes life sweeter. Just be sure not to overdo it:)

I would love to hear from you! What spending habits might be keeping you middle-class? What will you be doing in the future to cut back on spending? Please email me at and let me know! Au revoir, namaste and until next time!