4 Things The Middle Class Is Wasting Money On

4 Things The Middle Class Is Wasting Money On

Navigating personal finances while in the middle class can be challenging, especially when it’s unclear where your hard-earned money is going. Even with the best intentions, it’s easy to get caught in patterns of spending that do more to drain your wallet than enhance your life. This article explores four common areas where money might slip through the cracks, often without you even realizing it. By shedding light on these potential financial pitfalls, I aim to empower you with knowledge and strategies to make the most of your income and secure your financial future.

The four things the middle class is wasting money on:

  • High-Interest Debt
  • Underutilized Memberships and Subscriptions
  • New Cars
  • Expensive Housing Relative to Income

1. High-Interest Debt

High-interest debt can be a silent financial killer, gradually consuming a significant portion of your income without realizing its impact. Credit cards, payday loans, and other high-interest financial products are often marketed as convenient solutions to immediate needs, but their long-term cost can be staggering.

Many middle-class individuals and families carry high-interest debt, making minimum payments month after month. The interest keeps accruing, creating a vicious cycle that is hard to break. It’s like trying to fill a bathtub with the plug removed – your hard-earned money keeps draining away.

The math is undeniably troubling. Let’s consider a credit card balance of $6,000 with an annual interest rate of 19%. If you only make the minimum payments, it would take over 16 years to pay off the debt, and you would end up paying nearly $6,000 in interest, effectively doubling your original debt.

It’s not just the monetary cost; the stress of carrying high-interest debt can also have significant mental health impacts. It can feel like a heavy burden that’s always present, adding anxiety and stress to your daily life.

If there’s one area where reevaluation and change could save you significant money (and stress) over time, it’s this. By paying down high-interest debt as quickly as possible and avoiding it in the future, you can make a profound difference to your financial health.

2. Underutilized Memberships and Subscriptions

In our digital age, memberships and subscriptions have become a standard part of our lives, often more than we realize. Whether it’s that gym membership you rarely use, the streaming service you occasionally watch, the monthly subscription box you often don’t need, or the software service you forgot about – it all adds up. And it’s not just a drain on your wallet; it’s a wasted opportunity for that money to be used better.

Consider the math behind this: if you pay $50 monthly for a gym membership and only go twice a month, you’re effectively paying $25 per visit. Could you find a more cost-effective way to exercise? Likewise, if you’re paying for multiple streaming services but only use them for a few hours per week, the cost per hour of entertainment could be higher than you think.

Then there’s the phenomenon of ‘subscription creep.’ You sign up for a free trial, intending to cancel it before the first payment, but you forget. Or you subscribe to a service for a specific purpose or event, then neglect to cancel it when it’s no longer needed. These unused subscriptions can quietly drain away money each month.

And the costs aren’t just financial. Each of these subscriptions can also be a drain on your mental energy. Keeping track of them, deciding whether to keep or cancel them and managing the payments takes time and effort.

Being mindful about what you’re using and what it’s costing you can result in significant savings. Regular reviews of your memberships and subscriptions can help you identify what you truly need and value and cut out the rest, saving you money.

3. New Cars

Buying a brand-new car can feel exhilarating. The glossy shine, the fresh interior, the latest technological features, and the new car smell are appealing. However, it’s also one of the most effective ways to ensure you lose money, and here’s why.

When you buy a used car, you are simply paying for the cost of the car’s value, sales tax, and registration. When you buy a new car, the price tag includes much more than the cost of materials used to build the car or the car’s intrinsic value. Several factors contribute to the final price:

  1. Manufacturing cost: This is the cost of the raw materials and parts that go into the car. It includes everything from the steel used in the body, to the electronics in the infotainment system, to the rubber in the tires. Manufacturing costs include labor costs for the workers who assemble the car.
  2. Research and development (R&D): Car companies invest heavily in R&D to design new models, develop new technologies, improve fuel efficiency, enhance safety features, and meet regulatory standards. These costs are amortized over the number of vehicles expected to be sold.
  3. Advertising: Car companies spend significant money on advertising and marketing campaigns to promote their vehicles. This can include everything from TV commercials, online ads, sponsorships, and special events. These costs are also spread over the expected number of vehicle sales.
  4. Dealership costs: Dealerships are independent businesses, and the price of a new car includes a profit margin for the dealer. Additionally, dealers have overhead costs such as maintaining their showrooms, paying their sales staff, and providing post-sale services, which are all included in the car’s final price.
  5. Corporate costs and legacy pensions: Car companies have overhead costs that include everything from the salaries of their executives to the cost of maintaining their corporate headquarters. Additionally, many car companies have legacy costs, such as pension obligations for retired workers. These are also factored into the price of each vehicle.
  6. Shipping and logistics: This includes the cost to transport the car from the factory to the dealership, including freight charges, insurance, and any customs or import duties that may apply.
  7. Taxes and fees: Lastly, government taxes, registration fees, and other mandatory charges also add to the final cost of a new car.

So, the price of a new car is influenced by many factors, each contributing to the final amount you see on the window sticker.

When you drive a new car off the lot, it loses a significant chunk of its value in the first year alone. On average, a new car will depreciate by 20-30% in its first year. This means a car you bought for $30,000 will likely be worth $21,000 to $24,000 one year later. However, the exact amount of depreciation can vary widely based on the make and model of the car, its condition, mileage, and market demand. Researching the expected depreciation rates of specific vehicles before making a purchase is essential. This rapid depreciation continues for the first few years of the car’s life. So, if you like to change cars every few years, you’re continuously losing money in this depreciation cycle.

The numbers tell the story. If you buy a new car for $30,000 and it depreciates by 30% in the first year, you’ve essentially lost $9,000. And that’s before you consider other costs associated with new cars, like higher insurance premiums and expensive dealership servicing.

Financial experts often recommend buying a used car instead, particularly a car around three years old. At this point, the bulk of the depreciation has already occurred, meaning the initial hit in value has been taken by the first owner, not you.

It’s not just about cost, either. Purchasing a new car might lock you into a lengthy financing agreement, with monthly payments that could stretch your budget. In contrast, a used car is often cheaper to finance or might be affordable to buy outright, freeing up your monthly budget for other financial goals.

In conclusion, while new cars might have a certain allure, the financial reality often makes them a wasteful choice for middle-class earners. Considering a used car can save you thousands and still provide a reliable, enjoyable ride.

4. Expensive Housing Relative to Income

A comfortable, well-located home is a universal aspiration. However, the cost of housing has been outpacing income growth in many parts of the world for years. Many middle-class households spend much of their income on housing, whether on mortgage payments, rent, or maintenance costs.

Financial experts’ rule is not to spend more than 30% of your gross income on housing. However, according to a Harvard’s Joint Center for Housing Studies report, nearly half of renters in the U.S. spend more than 30%, and a quarter spend more than half of their income on rent.[1]

This over-expenditure on housing can lead to what is known as ‘house poor’ – when a person spends a large proportion of their income on home ownership, leaving little left over for savings, investment, or other expenses.

Moreover, the financial ramifications of overspending on housing can ripple out to other areas of your life. Large homes also come with the need for expensive furnishing and maintenance costs. You might feel pressured to work more to afford your home, leaving less time for relaxation and family. You might struggle to save for retirement, leaving you financially vulnerable later. And if you’re stretched thin financially, unexpected expenses can lead to high-interest debt, compounding your financial woes.

The bottom line? While it’s natural to want the best home you can afford, buying or renting a property that stretches your finances thin can lead to significant financial stress over time. It’s essential to balance living comfortably now and planning for your financial future.

Key Takeaways

  • Beware of the financial trap of high-interest debt. This debt can multiply the expense of your financial obligations and impede your wealth-building ability.
  • Reassess your current memberships and subscriptions. If you’re not making the most of these services, it’s money unnecessarily spent.
  • Rethink the allure of new vehicles. The rapid depreciation and other related costs make them a substantial drain on your finances.
  • Avoid the trap of costly housing relative to your income. Spending a disproportionate amount of your income on housing can leave you financially vulnerable.


Effective money management requires knowing where your dollars are going and recognizing the potential financial pitfalls you face. Avoiding high-interest debt, scrutinizing your memberships and subscriptions, reconsidering the appeal of brand-new cars, and not overspending on housing relative to your income can help ensure that your money works for you, not against you. Adopting these principles can empower you to take control of your finances and build a future of financial stability and prosperity.