Jaspreet Singh: 7 Middle-Class Habits That Could Be Keeping You From Getting Ahead Financially

Feeling like you’re stuck in place? You’re not alone. Many Americans struggle to build wealth and break the paycheck-to-paycheck cycle.

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Money expert Jaspreet Singh recently posted a video describing seven habits that keep middle-class Americans stuck in the rat race. Breaking these habits can help you take control of your finances, diversify your income and start to live the life you want.

Read on for an overview of these seven habits along with tips on how to break them .

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Working To Survive

The average household income in 2024 is a little over $78,000, according to one study. In his video, Singh breaks down how standard costs of living at that income level leave people with very little to save or spend. For example:

• Housing costs: $2,200/month
• Taxes: $1,650/month
• Car payments & maintenance: $1,000/month
• Utilities: $350/month
• Insurance: $275/month
• Groceries: $400/month
• Entertainment $400/month

If your household earns $6,500 each month, that leaves you with just over $200 to build wealth — that’s assuming you don’t have student loan payments, medical debt, a family emergency or a special event that costs extra in that month.

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So, what can you do? If you can’t grow your income right now, look for ways to cut costs. Cancel subscriptions you don’t need, reduce the number of cars in your household, switch to store-brand groceries and avoid delivery services. Instead of working to pay your bills, think of ways to reduce your bills so more of your income can go to building wealth. That’s the difference between working to survive and working to thrive.

Staying Comfortable

Your current job might keep you comfortable. However, if you want to break the paycheck-to-paycheck cycle, you may need to get out of your comfort zone and take some risks.

Singh refers to the HSBs — health insurance, salary and benefits — that encourage people to stay on a career path even if it isn’t meeting their needs.

There is nothing wrong with a job that offers good benefits. Singh’s point is that you shouldn’t let those benefits hold you back. Some examples of calculated risks that may help you break out of your comfort zone include:

• Starting a side hustle
• Learning a new trade
• Investing in a rental property
• Leaving your job for one with more growth potential

Glorifying Your Credit Score

Remember, credit isn’t wealth — it’s debt. A high credit score can help you get a home or car loan without crippling interest, but it won’t make you rich.

The average American owes around $104,215 in debt, according to Experian. That’s $104,215 (plus interest) that will go into someone else’s pocket instead of your savings or investments. While you might not be able to avoid debt entirely, especially when you need a mortgage or car loan, it’s important to understand the difference between credit and wealth and avoid taking on unnecessary payment plans.

In other words, prioritize your bank balance over your credit score. Here are some tips:

• Minimize credit card payments
• Never borrow money for a purchase you don’t need, such as clothes or furniture
• Don’t take on a mortgage without consistent, long-term, diversified income
• Keep your car payments low by buying used.

Relying on One Income Source

You may have heard that most millionaires have multiple income streams. Diversifying your income is one of the most important things you can do to resist economic downturns and set yourself up for a financially stable future. No matter how high your salary is, an emergency, recession or other unexpected change could devastate your finances if that salary is your only source of income.

That doesn’t mean you need to go out and buy investment properties or start your own business today. However, you can work toward expanding your income sources by saving and investing instead of spending all of your disposable income.

Living Beyond Your Means

Do you feel like you need to buy more to keep up with society’s expectations? You may be living beyond your means even if you don’t realize it.

Singh uses the example of a $5,000 sofa. If you have $5,000 left after your monthly expenses, you might think you can afford the sofa. However, that leaves no money for your future. Singh describes a simple rule to keep him from overspending: “If I can’t afford five of them, I won’t buy one of them.”

Another way to keep your spending in check is to stick to the 50-30-20 budgeting rule: 50% of your income goes to living expenses, 30% to things you want and 20% to savings and debt. If that sofa takes up your entire 30% spending allotment for the month, you won’t have any cash left for other splurges — choose a more budget-friendly option.

Not Learning From Your Mistakes

It’s normal to make mistakes as you grow your wealth. A risky investment might not pay off, or a second income stream might not be as profitable as you thought. What matters most is that you learn from those mistakes.

Avoid falling into the sunk cost fallacy: the habit of continuing something just because you’ve already spent money or time on it. If an investment isn’t working out, the best thing you can do is walk away, accept the loss and make a better choice next time.

Focusing on Your Emotions

The final bad habit Singh discusses is focusing on your emotions instead of making rational financial decisions. He explains that many people get caught in a “victim mindset,” claiming that they can’t build wealth because of the economy, their family or the government. Those feelings of resentment will only hold you back.

Here are a few tips to keep emotions out of your financial decision-making:

• Focus on your current situation and what you can change
• Set aside some time for financial planning every month
• Talk to your spouse or partner about ways to cut costs
• Don’t compare yourself to others (especially on social media)
• Avoid impulsive decisions — think it through and run the numbers before you act.

This article originally appeared on GOBankingRates.com : Jaspreet Singh: 7 Middle-Class Habits That Could Be Keeping You From Getting Ahead Financially