What we can learn from the middle class?

11 Sep 2020

Is middle class a swear word? 

If you speak to affluent professionals, they will say that middle class represents mediocrity and trying to make ends meet. 

Many of these professionals were raised in middle class households and know all the struggles that go along with it and strive not to have the same struggles again. 

And yet, although elevated to affluent status, they still follow middle class indoctrination. Brainwashed by middle class struggles, they take these struggles with them into affluency, like spending till their budget is at its max or buying things they can’t afford. The spending is still the same, just the value of the goods have increased. e.g. from discount stores to Dolce and Gabbana. This spending habit and increase in debt is the pitfall of many ‘broke’ affluent professionals. 

We need to break free of this ‘middle class’ mentality and shift to the ‘saving’ mentality. Afterall, we became affluent professionals to build our wealth, so we don’t have to struggle as our parents did.

But there is something we can learn from middle class lifestyle. The priority of what’s important. Goals to work towards.

These days, middle class is not defined by a bank balance but by a lifestyle approach. It is determined by 6 factors that people strive for. Add saving as the 7th factor into the mix, and you have the ideal goal template to follow.

1. Owning a home – everyone wants to own their own home. It is probably the biggest asset that you will have in your financial portfolio. As the saying goes, ‘why pay off someone else’s mortgage if you can pay off your own’. Purchasing property to rent out will be a nice addition to retirement income or even purchasing for investment purposes could add to your financial portfolio. Property usually increases in value with time if bought in the right areas.
2. Owning a car – we all want a nice car, but it is the one asset that loses the most value the quickest. Keep this in mind. Are you purchasing for functionality, for status or for investment as a classic car?
3. University education for your children – a good education will open doors for our children to get good paying jobs and build careers. This is probably the most neglected investment. Invest in an education plan early on in your child’s life, so it has time to accumulate with compound interest. Universities and private school costs are on the rise at an astronomical rate.
4. Retirement savings – we are living longer, and our company and social security pensions just won’t be enough to live comfortably on when we retire. Don’t depend on these for an income. Invest in your own personal pension plan which you can contribute towards throughout your whole working life. Most of us are not saving enough for retirement.
5. Health and Life cover – You need good health insurance to ensure you are taken care of if anything goes wrong. Also looking after yourself when you are younger will save you health costs when you are older. Who will look after your family when you are not around anymore? Life insurance will make sure your family is taken care of in the unfortunate event of your early demise.
6. Family vacation – this may not seem essential, but it is vital for the wellbeing of your family and yourself. Vacation time is necessary to destress from work and to spend quality time with your family. A vacation at least once a year is therapy for a family.
7. Savings – It is important to have a savings fund to cover unforeseen expenses and emergencies along with savings for that vacation or deposit for a house.*

It is important to chat to your deVere adviser about a comprehensive financial plan that covers all aspects of your lifestyle. [email protected]

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.