The middle class has a bad tendency to spend in liabilities instead of building assets and that habit of theirs doesn’t let them get away from the middle-class trap, which is also called the debt trap.
When a person starts to earn money, they immediately think of buying a new phone, new laptop, luxury clothes, expensive watches etc. Half of the things they purchase are bought on EMIs. As their salary increases, they wish to lead a better lifestyle, which is absolutely alright but in doing so, they end up paying higher EMIs. They buy another phone, more accessories purchase a bike and keep on paying the EMIs.
He buys a new AC, a new refrigerator, a new washing machine as his salary increases but after paying the EMIs, his savings remain stuck at the same figure that he used to save 5 years back. Buying a car has now become a status symbol and nobody wants to be left behind. So the middle-class guy purchases a car, taking a heavy loan which further shoots his expenses. He is left with hardly any money at the end of the month.
The only way the middle-class trap be avoided is to build assets first and then spend on your expenses. If you are earning 10 rupees, keep 2 rupees aside for investment and manage your expenses from the 8 rupees. Even from that, try to save 1 or 2 rupees at the end of the money which will go into emergency funds. That way, you will have a good amount of savings and a proper investment plan that will take care of inflation. But people end up spending the whole 10 rupees and borrow money from friends or take loans from the bank in the form of EMIs to lead a lifestyle beyond their means.
0 Comments