I am thinking about what are some of the biggest middle class money traps that some of my residents find themselves in. I am hoping we can list some of the biggest ones as these are nice precursors for screening success.

A trap I see - rather often is car leases on nicer cars. I see this as renting a life style which might work well for a business use, but not so well as they are chasing what is trendy then.

What are some other middle class financial traps?

Eating out every meal, or ordering ready to eat stuff delivered to the door.

Expensive vacations.

Someone will have to explain why leasing a car for a business is better than owning one. You can deduct costs either way, to my knowledge.

Agreed that car leases is one of the worst. Others probably include financing household furnishings, vacations, and clothing. Things that do not last long, depreciate rapidly and return no financial value. I see when folks sell their houses they garage sale a lot of their perfeclty fine funiture rather than move it, then they go to the furniture store and put $15,000 - $30,000 worth of new stuff on credit for 5 years at "easy" payments of just $300 a month. They tell themselves they'll pay it off in 18 months so they don't pay any interest, but then "life happens" and they don't so all that interest gets back charged and added on.

Juggling credit cards to transfer debt around rather than actually paying it off. A lot of folks claim they're able to pay off cards every month, which they then use as the excuse to justify going after points and perks, but the stats don't lie. Over 70% of people do not pay off their cards each month. They're paying interest and "feeing" themselves to death by 10,000 tiny cuts. A $35 fee here.... $100 of interest paid there. It all adds up.

Owning late model cars, even if bought for cash, is a money pit. Think of how much higher the yearly personal property taxes and insurance are on 3 vehicles < 2 years old vs. those that are 10 years old. and if they're swapping cars out every 3 years or so, they take the butt-kicking on the depreciation as well as keep ensuring they end up paying the maximum tax and insurance costs.

College too. A lot of parents want "only the best" for little Joey and Susie, so they let them attend out of state private schools costing $150,000-$200,000 to get a Bachelors degree when an in-state public school costs less than half that. They cosign for the student loans...and we know how well that goes. Billions of student loans are delinquent and would be clobbering middle class budgets right now, but for the Prez extending the moratorium on loan payments. Before Covid, the average student loan debt was around $30K post graduate, and many of those were in default when neither students nor parents could keep up.

Overall, I'd say though it's not one big thing. It's the little thises and that's. Everyday decisions that add up to large amounts over 30-40 years. That, and lack of investment with those dollars hinders wealth building.

Smokes, Alcohol, Lotto and Energy Drinks.

Food delivery

Granddaughter works at TacoB. when you order through an service/app the charge for the actual food is more than when you come to the location yourself. then, you pay for delivery, some kind of service fee and are expected to tip.

The 30 year mortgage with low down payment.

A foundation, framing,windows, piping and wiring , the land and improvements may last 30 years, roofs, flooring, hvac equipment, appliances, water heaters will not last nearly that long. Those items were financed for 30 years.

The homeowner never could save up any money, and thinks that if he can afford the payment, he can afford the house. Seemingly, he never understands that writing big checks in addition to mortgage payments is perfectly normal.

Buying stuff they can not afford to pay cash and instead charge it on an over priced Credit Card -- with a 6 month teaser rate of 1.9%, then jumps to 19.9%. And they can't pay it off, will carry the balance for 60 months. So a $1,995 big screen TV will end up costing them close to $4,000. Double!

One of my tenants was in the process to lease a new car. She said after the lease was up, and the price would be lower, she would buy the car. We worked out the numbers. If she purchased the car and got a "dealer low rate on the purchase, the car would cost her $24,000. If she leased it she would pay $14,000 in lease payments, then $18,000 to buy the car -- a total of

$32,000 -- almost $8,000 more.

Country club memberships, pool memberships or any of the other expensive clubs such as cigar, wine, liquor, delivered meal kits.

Boats, motorcycles, jet ski's, 4 wheelers, snow mobile or other big kid toys.

Elective surgeries such as botox, facelifts, tummy tucks

Less us not forget - refinancing a loan. Seems like the bankers want to talk to you on a 30 year loan ohhhh about year 7 to about 10.........you know when you just finishing you the front payments on the interest.

Because they don't really want to save them money but make money for themselves.

You mentioned residents, so I was thinking more in terms of everyday purchases and not mortgages.

Student Loan Debt - A debt that can't be cancelled via bankruptcy (unless it is the government going bankrupt forgiving it)

The social life - meeting friends out for meals and spending money on drinks in a bar rather than taking turns having round robins at each other's houses.

After years of being frugal, I feel I can let loose a little. I have figured out a way to trim my time, grocery and energy bills by buying a hot lunches at the grocery store cheaper than I can make them at home. Time is money. And with the cost of energy today?

I've never had food delivered, except as a secret shopper. Writing a review of the delivery service and food was part of the job and pay. The food and tip were free.

In high school they taught us life lessons. In our secretarial class the teacher told us if we went out to eat, raid the cracker basket in case our money ran out before we got our next paycheck.

Fun times!

I don't think middle class tenants rent furniture and they can probably afford their fancy coffee drinks.

The big debt I see on applications is car loans. They believe they must have a nice new car for each of them and again for the kids when they get their driver's license.

I see a lot of credit card debt, which I guess is most likely the nice clothes and restaurant meals. Still paying today for the steak they are five years ago.

Kids are a huge expense from day care to sports to college.

Middle class are paying on student loans. My low income tenants all have student loans, but they simply never make any payments on the student loan.

One of my tenants just bought a lovely big power boat and in addition to boat payments, he has to pay storage fees on it. I'm probably middle class and my family has an expensive aluminum fishing boat, too.

FWIW,

The average middle class person in the United States has a net worth of about $105,000. The median net worth is $122,000 and the median annual income is $66,000.

Ray,

Dad taught me a few simple financial rules:

1st ten percent goes to the Lord.

2nd ten percent goes to long term savings

Live on less than the 80 percent that's left.

Never borrow on anything that loses value.

Some of you have really weird ideas as far as "middle class money traps" go. Sorry, but the average middle class family should have no problem having cable TV, cell phone plans, pets, computer monitors, candles, and eat out once in a while (even going to a bar with friends now and then). Those aren't "money traps" or even "living outside their means." That's normal behavior for "middle class" people.

$5.00 a gal gas

I don’t need the biggest TV, the latest I-phone, a new car( my 2009 Toyota Tacoma and 2006 Toyota Avalon are great, the house i bought in 1971 for $35,450 and now worth $1,000,000 is affordable and my one suit for weddings and funerals still fit.

John,

They are money traps and living outside your means if you achieve that status living paycheck to paycheck and have credit card debt. When you do that you don’t get ahead, and can’t handle small emergencies without going into further debt. You have at that point trapped yourself by the choices you made.

When I hear middle class, I am thinking of professional or managerial types with $200k - $400,000 k household income.

Hmm...guess I was gauging middle class a bit above Biden's poverty level of above $100,000. By those standards, however, if we had cable, pets, went out to bars with friends for an evening, we wouldn't have savings. Heck, we just got a cell phone plan for Christmas last year and not the unlimited top tier. We go on one or two mini get aways a year.

Lisa: We can agree to disagree on this. I consider "middle class" to be people with professional jobs -- such as a couple making $100k+ per year. Middle class is not necessarily "median income" to me.

I think of "middle class" as people that are saving for retirement and not living "paycheck to paycheck."

Sure, there are some that do that -- with too much "keeping up with the Jones" going on. But, in this thread, when I think of "middle class money traps", I do not think of those "traps" being cable TV, pets, and eating out once in a while.